Demand from tenants for properties hit a five-year high in the final quarter of last year, according to research from Paragon Bank.

Almost a third of landlords, or 32 per cent, reported increasing levels of tenant demand during the final three months of the year, the highest level since the first quarter of 2016.

The level is up from 29 per cent reported in the previous quarter and 25 per cent recorded in the same period a year ago.

However, the data showed clear regional differences in the proportion of landlords noting higher tenant demand.

In the South West, 58 per cent of landlords reported growth in tenant demand, compared to just 10 per cent in central London.

Other regions that noted growth grow include the West Midlands 48 per cent, Wales 44 per cent and the South East 42 per cent.

Despite healthy levels of tenant demand, the majority of landlords plan to keep rents at the same level over the next six months, the survey said.

Nearly two-thirds of landlords, or (64 per cent, say they have no plans to change rents, 15 per cent say they will increase rents and 9 per cent plan to lower rent levels.

Paragon Bank Managing director of mortgages Richard Rowntree says: “We saw a clear upturn in tenant demand in the second half of 2020 after restrictions on the housing market were lifted. The strong levels of people looking for rented property continued during the final quarter, which may be related to renters wanting to secure a new property ahead of any new lockdown restrictions, which of course came from November onwards.”

Rowntree adds: “The housing market is also reporting high levels of tenancy renewals, so good quality rental property is at a premium in desirable markets. I would expect that to continue into the new year and throughout 2021.”

Landlords, also ended 2020 in largely confident about the year ahead, despite the pandemic.

Landlord confidence edged up year-on-year during Q4 2020 across four of the five key optimism indicators recorded by the poll.

Owners felt more confident about rental yields, their capital gain, the UK private rented sector and their own letting business than they did during the same period in 2019.

The only indicator that was down was confidence in the UK financial markets, which here could reflect the economic damage of Covid-19, plus Brexit.

Overall, 35 per cent of landlords rated the prospects for their own lettings business as good or very good during the final three months of last year, compared to 30 per cent in the previous quarter and 31 per cent during the same period in 2019.

Rowntree adds: “Despite the pressures on landlords due to volatile economic conditions and rising unemployment hitting tenants’ income, confidence is strong and robust. Tenant demand is playing a key role in that.”

Research group BVA BDRC surveyed 846 landlords between December 2020 and January 2021 for Paragon Bank.