Tenant stability continues to drive investment case for buy-to-let
Following a period of modest softening, rental yields across the Private Rented Sector have stabilised for the first quarter of 2026, with average gross yields edging up to 6.5% from 6.4% in Q4 2025, according to the latest Landlord Trends research from Pegasus Insight.
The figures show that despite the previous softening, overall profitability remains strong, with 84% of landlords describing their lettings activity as profitable. However, for the second quarter in a row the gap between income and rising operational costs has narrowed for some. The proportion of loss-making landlords is down to 4% in Q1, from 6% in Q4 2025.
HMO landlords seeing strongest yields
HMO landlord investments are performing the best, delivering average yields of 7.6%. Regionally, the North West is generating average yields of 7.1%, in contrast to London where average rental yields were 5.3% for the quarter.
More than half (58%) of landlords say tenant demand is strong, although this is down 15 percentage points compared with the same period a year ago.
Separate Wave 1 2026 Tenant Trends research from Pegasus Insight, based on 3,000 interviews with private renters, shows that the typical renter has now been in their current property for an average of 5.3 years. Two-thirds say they plan to stay beyond their current agreement, intending to remain for a further 4.3 years on average.
Only 17% of tenants plan to leave their current property, driven by personal circumstances such as relocating or upsizing rather than dissatisfaction with their tenancy. Over two-thirds rate their recent rental experience as positive – a figure that has held steady year on year.
Encouraging signs
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.”
