Rental yields across the private rented sector stabilised in the first quarter of 2026, according to Pegasus Insight.
Average gross yields edged up to 6.5% in Q1 2026, from 6.4% in Q4 2025, following a period of modest softening.
The latest Landlord Trends research found that overall profitability remained solid, with 84% of landlords describing their lettings activity as profitable. However, this was the second consecutive quarterly decline, as rising operating costs continued to narrow margins for some landlords.
The proportion of loss-making landlords eased to 4% in Q1, down from 6% in the previous quarter, suggesting that conditions remain manageable for most landlords despite a more demanding operating environment.
Performance continued to vary by portfolio type. Landlords operating houses in multiple occupation were again the strongest performers, recording average yields of 7.6%, compared with the market-wide figure of 6.5%.
Regionally, the North West generated the strongest returns, with average yields of 7.1%. London landlords recorded the lowest average yields, at 5.3%, reflecting higher acquisition costs relative to rental income.
TENANT DEMAND SUPPORTS INCOME STABILITY
Pegasus Insight said tenant demand continued to provide a supportive backdrop. More than half of landlords, 58%, rated current tenant demand as strong, although this was 15 percentage points lower than a year earlier.
Separate Wave 1 2026 Tenant Trends research from Pegasus Insight, based on 3,000 interviews with private renters, found that the typical renter had been in their current property for an average of 5.3 years.
Two thirds of tenants said they planned to stay beyond their current agreement, with an average intended additional stay of 4.3 years. Just 17% said they planned to leave their current property, with most citing personal circumstances such as relocating or upsizing rather than dissatisfaction with their tenancy.
More than two thirds of tenants rated their recent rental experience as positive, a figure that was unchanged year on year.
Mark Long, founder and managing director of Pegasus Insight, said: “The stabilisation of yields at 6.5% is a more encouraging signal than it might first appear.
“Coming after a period of gradual softening, it suggests the sector has found a degree of equilibrium, at least for now, even as regulatory complexity and cost pressures continue to intensify.
“What the data consistently shows is that profitability is increasingly a function of portfolio structure. HMO landlords, those with larger portfolios and those operating through limited company structures continue to demonstrate greater resilience, while more traditionally structured portfolios have less of a buffer as costs remain elevated.
“The tenant picture is genuinely important context here. Long tenures, strong satisfaction scores among those with direct landlord relationships, and continued intention to stay all point to an occupancy base that is far more stable than the regulatory debate might suggest.
“For lenders and investors, that underlying stability is a fundamental part of the investment case for buy-to-let.
“The challenge for the sector is translating that structural stability into sustained confidence. With landlord sentiment still subdued and divestment continuing to outpace acquisition, supply remains under pressure.
“How the market responds once the Renters’ Rights Act beds in will be the defining question for the year ahead.”
