The private rented sector continues to be a strong-performing asset class, delivering stable returns, healthy yields, rental growth and increased confidence, despite the cost and regulatory challenges landlords have faced, according to new research from intermediary-only specialist lender Foundation.

In its Landlord Trends research for Q1 2026, conducted in partnership with Pegasus Insight, more than eight in ten (84%) of landlords say their lettings are profitable. The data also showed increasing average rental yields, up to 6.5% for the first quarter. Portfolio values and rental income also increased quarter-on-quarter.

Resilient landlords

Foundation said that professional landlords are proving resilient, adapting their strategies to changing market conditions and focusing on long-term income and capital growth. Confidence in the sector also seems to be recovering, with the NRLA’s landlord confidence measure rising across all regions in the first quarter.

Meanwhile, Foundation says there is now less talk among landlords of exiting the market, with the proportion planning to stay rising to 63%, up from 58% in the last quarter of 2025.

Six in ten (61%) of landlords expect to increase rents over the next 12 months, with an average projected rise of 5.7% as rental growth continues.

Structured, portfolio investment strategies

Investment in the sector also continues. Nearly four in 10 landlords with borrowing (39%) are planning to remortgage in the next year, while the average portfolio size has increased to 7.3 properties.

The research also shows that landlords are taking their regulatory responsibilities seriously, such as the need to upgrade to EPC C rating by 2030. 62% of those with lower-rated EPC properties plan to carry out works to meet future requirements, showing a willingness to invest in their property stock to maintain long-term viability.

Softening tenant demand

However, although still strong, tenant demand has softened. 43% of landlords report experiencing void periods, and 30% rental arrears, over the last 12 months.

Investment intentions have increased, from 5% to 8%, but the research highlights that four in ten (42%) landlords plan to sell at least one rental property in the next year.

Grant Hendry, director of sales at Foundation, said: “The latest data shows a landlord community and wider private rental sector that continues to prove its resilience. Investors are taking a structured, long-term approach, and there is clear evidence of landlords planning ahead, whether that is through refinancing activity or preparing for future EPC requirements.”

However, he warned that pressures remain. “Softer tenant demand and rising voids show this is a more balanced market than in recent years, and some landlords will continue to reassess their position. However, the overall picture is one of a sector that is evolving rather than retreating.”