Tenant demand cools but remains strong overall
Tenant demand remains robust in most parts of the country but has eased over the past year, according to landlord research from mortgage market specialist Pegasus Insight. Its latest Landlord Trends report for Q2 2025 shows that 71% of landlords rate tenant demand in the areas where they are letting properties as ‘strong’ – with 33% saying it is ‘very strong’ and 39% ‘quite strong’. This is down from 82% in Q2 2024. Only 4% describe demand as ‘weak’, while 18% say it is ‘average’.
This cooling follows a period of exceptionally high demand driven by low rental supply, post-pandemic migration, and sustained pressure on affordable housing. While levels remain high by historic standards, softer demand could affect rental growth, yields, and investment appetite in some markets.
Regional differences are marked. Yorkshire & Humber tops the table, with 81% of landlords reporting ‘strong’ demand, 36% of them ‘very strong’. By contrast, London and the East Midlands see lower figures at 64% and 63% respectively.
Several factors may be influencing the shift. Across the UK, around a third of students now choose to live at home – a proportion considerably higher in London and parts of the Midlands – reducing pressure on local rental markets. The affordability squeeze is also prompting more tenants to stay put, share, or remain with family, particularly where rents are highest. Meanwhile, the growth of remote and hybrid working has given tenants more freedom to live further from traditional commuter hubs.
Bethan Cooke, director of Pegasus Insight, said: “Even after an 11% drop, over seven in ten landlords are still seeing strong tenant demand, which shows just how competitive the rental market remains. However, the fact that demand has eased for the first time in a while suggests we may be at a turning point. For landlords, this could mean less scope for rent increases in some areas, especially where affordability is already stretched.
“That said, demand levels remain far above those of five years ago, and the fundamentals of the Private Rented Sector are still solid. The question is whether this is the start of a sustained rebalancing between supply and demand, or just a short-term pause in the face of wider economic pressures. Either way, landlords and lenders will be watching closely.”