Tenant demand in the UK private rental sector has increased for the first time in two years, according to data from Pegasus Insight, though concerns remain over declining landlord investment appetite.
The firm’s Landlord Trends data for the second quarter of 2026 shows that 63% of landlords now describe tenant demand as either ‘very strong’ or ‘quite strong’, up from 58% in the first quarter of 2026. This marks the first quarterly increase since the first three months of 2024, following two years of consistent decline.
Supply constraints persist
The uptick in demand comes as the supply of homes in the Private Rented Sector remains under pressure. Some landlords have warned of potential exits due to the Renters’ Rights Act reforms, raising questions about the sector’s capacity to meet growing tenant needs.
Mark Long, founder and director of Pegasus Insight, said: “Tenant demand has been gradually normalising from the exceptional levels recorded in 2024, so a five percentage point rise this quarter suggests that the need for rental accommodation remains considerable.”
The data indicates that almost three in ten landlords now report very strong demand, while just 5% describe demand as weak. Long noted that these figures highlight how millions of households rely on the private rented sector for housing.
Investment appetite remains weak
Despite strengthening tenant demand, landlord appetite for investment remains subdued. The research shows that more landlords are looking to sell property than buy, creating a potential supply-demand imbalance in the market.
This trend could have implications for landlords navigating mortgage decisions as they reassess their portfolio strategies amid regulatory changes.
Long added: “Any further measures that discourage investment or prompt more landlords to reduce their portfolios risk widening that imbalance. If demand continues to recover while the stock of available rental homes contracts, the pressure will ultimately be felt by tenants through reduced choice and higher rents.”
The findings come at a time when housing supply is constrained across the UK property market, with alternative sales methods gaining traction as investors seek opportunities in a challenging environment.
Policy implications
Long suggested that policy needs to recognise the role played by private landlords in providing homes. He stated that the priority should be encouraging investment and retaining existing rental stock, cautioning the government against introducing further barriers that could reduce supply.
The data suggests a growing tension between tenant needs and landlord sentiment, with the sector facing pressure to balance regulatory reform with maintaining adequate housing supply for the millions of households dependent on private rental accommodation.
