BLOGS

The great slowdown: UK rents lose momentum

After several years of double-digit rent increases, the UK's private rented sector is experiencing a pronounced deceleration. REalyse data tracking asking rents over the past 24 months reveals year-on-year growth has fallen to a median of around 3.5–4% nationally — a stark contrast to the 10%+ figures that became routine between 2021 and 2023.

Regional disparities are widening. Scotland, where rent controls have been in effect since 2022, recorded year-on-year growth of just 0.86% — effectively flatlining when inflation is factored in. The South East and East of England are also softening, with annual increases of 1.78% and 1.70% respectively. Even London, long the engine of rental inflation, is cooling to around 3.2% growth.

At the other end of the scale, the North East of England leads with 8.79% annual growth, followed by Yorkshire and the Humber at 6.4%. These higher-yield regions have attracted investor interest, but many smaller landlords question whether the numbers still stack up once mortgage costs, maintenance, and regulatory compliance are accounted for.

Yields under pressure

Gross rental yields tell a similar story of margin compression. REalyse data shows the UK average gross yield sits at approximately 6%, with a median of 5.9% across property types and regions. London remains the toughest market for income-focused investors: yields for flats average around 4.7%, while terraced houses manage only 4.8%.

By contrast, the North East delivers average yields of 7.4–7.7% for flats and terraced properties, and Scotland's flats achieve around 7.3%. These figures look attractive on paper, but they assume landlords can secure reliable tenants, avoid void periods, and navigate the growing regulatory burden — assumptions that are increasingly difficult to meet.

With mortgage rates elevated compared to the pre-2022 era and many fixed-rate deals coming up for renewal, the gap between gross yield and net return after financing is narrowing. For leveraged landlords, a 5–6% gross yield can quickly become a loss-making position once interest payments are deducted.

Section 21 abolition: the final straw?

The Renters' Rights Bill, which will abolish Section 21 'no-fault' evictions in England, is set to become law in 2026. For many landlords who have relied on Section 21 as a backstop for regaining possession — whether to sell, refurbish, or remove problem tenants — the reform represents a fundamental shift in the landlord-tenant power balance.

Industry bodies have warned that the loss of Section 21, combined with often lengthy and costly Section 8 court proceedings, will deter smaller landlords from remaining in the market. Early evidence supports this view: rental listing volumes have fallen by 5–7% year-on-year in most English regions. In Scotland and Wales, where rent controls and tenant protections are already tighter, the decline is even steeper — with listing volumes dropping by over 20% in both nations compared to the prior 12-month period.

Landlords who once saw buy-to-let as a passive income stream are now confronting a regulatory environment that demands professional management, significant capital reserves, and tolerance for legal complexity.

Tenanted-property auctions: the exit door

Against this backdrop, a growing number of landlords are choosing to sell — but not through traditional estate agency channels. Tenanted-property auctions have surged in prominence, offering landlords a faster, more certain route to disposal while avoiding the need to first serve notice and regain vacant possession.

For landlords with sitting tenants on periodic or fixed-term agreements, selling at auction allows them to exit immediately. Buyers at these auctions are typically institutional investors, portfolio landlords, or speculative purchasers who see value in the discounted prices that tenanted stock commands. REalyse data shows sales listing volumes reached their highest point in March 2026, with over 200,000 properties coming to market — a sign that supply-side pressure is building.

Auction houses report that tenanted lots now represent a growing share of residential catalogues, with yields on these properties often exceeding 7–8% precisely because the pricing reflects the complexity of managing inherited tenancies.

What this means for the PRS

The structural shift underway in the private rented sector is unlikely to reverse quickly. Smaller landlords — those with one to three properties — are most vulnerable to the combination of stagnating rents, higher financing costs, and regulatory reform. Many are choosing to exit rather than reinvest.

The gap they leave is being filled, in part, by institutional capital: build-to-rent developers, housing associations expanding into market rent, and portfolio landlords with the scale to absorb compliance costs. But this transition takes time, and in the interim, tenants face reduced supply and potentially higher rents in areas where competition for stock is intense.

REalyse data shows days on market for rental listings has risen, peaking at over 50 days in late 2025 — suggesting that while supply is tightening, affordability constraints are also limiting tenant demand at higher price points.

Regional spotlight: Scotland's warning sign

Scotland offers a preview of where England may be heading. With rent controls capping in-tenancy increases and the existing tenancy regime already favouring tenants, the Scottish PRS has seen the sharpest supply contraction. Rental listings fell by nearly 23% year-on-year, and rent growth has slowed to below 1%. Professional landlords who remain are consolidating, while amateur investors are selling up — often to owner-occupiers, further shrinking the rental stock.

Outlook: a market in transition

The UK's private rented sector is at an inflection point. The era of easy gains for small-scale landlords appears to be ending, replaced by a more professionalised, institutionally-dominated market. For those who remain, data-driven decision-making — understanding local yields, comparable rents, tenant demand, and regulatory risk — will be essential to navigating the years ahead.

Landlords considering their options should conduct rigorous due diligence on their portfolios, modelling scenarios for both retention and disposal. Those who choose to sell should explore tenanted-property auctions as a viable route to exit, while those who stay must ensure their yields can withstand rising costs and regulatory change.