UK landlords are closing out the year with their strongest profitability since 2019, supported by record rental yields, according to new research.

Nearly nine in 10 landlords are now making a profit, as rising rents continue to offset higher costs and regulatory pressures, data from Pegasus Insight suggests.

The Landlord Trends Q3 2025 report shows that 89% of landlords reported profitability during the quarter, the highest level recorded in six years. Of those, 17% said they were generating a ‘large’ profit, while 72% described their returns as a ‘small’ profit.

Just 7% of respondents said they were breaking even, with only a small minority reporting losses.

Improving profitability has been underpinned by a further uplift in rental yields. Average achieved gross yields reached 6.6% in Q3 2025, the strongest level seen in more than a decade and above the previous 10-year high recorded last year.

Regional performance continues to play a significant role. Landlords operating in the North West achieved average yields of 7.4%, while those in Yorkshire and the Humber recorded 7.2%, reinforcing the importance of geographic diversification in sustaining portfolio performance.

Despite the strength of current returns, the research highlights a modest cooling in sentiment about the future. Expectations for both rental yields and capital gains eased quarter on quarter, falling by 3% and 4% respectively, as landlords remain cautious about the outlook amid ongoing economic and regulatory uncertainty.

Mark Long, founder and managing director of Pegasus Insight, said: “What really stands out in the Q3 data is the gap between how landlords are performing today and how they feel about the future.

“On the hard numbers, profitability and yields are the strongest we’ve seen for years, which is a clear sign of resilience in the sector.

“At the same time, confidence indicators have edged lower, which tells us landlords are remaining cautious rather than complacent. Many are choosing to consolidate, focus on cash flow and manage their portfolios carefully, sensible behaviour in an environment where policy and cost pressures remain front of mind.

“As we head into the end of the year, the message from the data is that landlords have shown a real ability to adapt.

“The fundamentals of rental demand and income generation remain robust, even if optimism about the medium-term outlook is more muted.”