Paragon has reported that tenant demand continued to rise during the third quarter of 2011.

The specialist buy-to-let lender’s Private Rented Sector Trends Report found that 44% of landlords said tenant demand increased during the third quarter and just 4% thought it declined.

When asked for their views on tenant demand for the next 12 months, 49% of landlords said they expect tenant demand to continue to increase.

34% of landlords reported an increase in rental income, with only 4% saying that it had decreased. Of those landlords who achieved an increase in Q3, 11% said it was between 2% and 4%.

Paragon found there has been a shift in the types of properties that landlords are looking to purchase. Terraced houses were the most popular choice at 41% followed by flats (35%) and then bungalows – which have surged in popularity from 2.7% in Q2 to 10% in Q3.

Nigel Terrington , chief executive of Paragon, said: “Tenant demand has continued to increase for a third quarter