TENANT demand for privately-rented property hit a two-year high during the fourth quarter of 2010, a survey has revealed.

Paragon Group’s latest quarterly snapshot of developments in the market said the proportion of landlords reporting growing levels of tenant demand was at its highest level since the final quarter of 2008.

Four out of 10 landlords said tenant demand grew during the final quarter of 2010, compared to 36% during the third quarter. The proportion of landlords reporting growing levels of tenant demand has now risen for six consecutive quarters – coinciding with a shortage of mortgage finance in the owner-occupied mortgage sector.

Just 4% of landlords said tenant demand fell during the quarter, the lowest proportion since the third quarter of 2008 and the second lowest level since Paragon started collating the data in 2004.

Nigel Terrington, Paragon Group chief executive, said: “Tenant demand shows no signs of slowing down and in some busy markets, such as London, there is anecdotal evidence of sealed bids being used for certain properties.

“This will become more commonplace across the UK unless the private rented sector is able to expand to meet higher levels of demand.

“Four out of 10 landlords say that tenant demand grew during the period, which is a significant number and has major implications for renting in the UK if the issue of rental property supply cannot be addressed.”

Mr Terrington said: “The prospects for landlords are strong. Tenant demand continues to strengthen, yields are healthy and stable and confidence is high. The housing market is presenting some strong buying opportunities and landlords are well-placed to take advantage.”