Costs and regulatory change driving price hikes for tenant
Property investor landlords are increasing rents, reassessing portfolios and prioritising lower-risk tenants in the wake of the Renters Rights Act, re-emergence of realistic gilt yields and rising operating costs, according to Handelsbanken’s fifth annual Property Investor Report.
In a survey of 200 UK real estate investors, property management professionals and landlords, nearly two-thirds (63%) said that higher overall costs have caused them to raise rents.
More than two-fifths (41%) said that costs have prompted them to prioritise lower risk tenants, Meanwhile, in response to the Renters’ Rights Act, more than half (59%) are tightening tenant selection criteria and 44% are considering raising rents earlier than planned.
Landlords reported increases in a range of costs, including maintenance or repairs (cited by 45%), insurance (cited by 41%) and energy efficiency upgrades (cited by 40%).
Wider portfolio decisions
The report also found evidence that rising costs are affecting wider portfolio decisions. One in five (20%) of professional property investors said higher costs had prompted them to sell, while a similar amount (19%) have taken properties off the rental market. Nearly half (46%) said higher costs have caused them to delay upgrades or improvement works.
The research found that the median cost of complying with the Renters’ Rights Act is £5,000, while the mean is £31,411. The median expected annual compliance and upgrade spend over the next 12 months is £20,000, although this should be understood as a portfolio-level indicator among professional investors with sizeable portfolios, rather than a direct proxy for individual rent increases.
James Sproule, UK chief economist at Handelsbanken, said: “The private rented sector is not simply becoming more expensive for landlords to operate; it is becoming more selective.
“Higher costs and greater tenant rights are feeding into rent decisions, but they are also changing how professional investors think about tenant risk, affordability and long-term portfolio planning.”
Portfolio expansion planned
However, 84% of professional property investors plan to increase their portfolio holdings over the next 12 months, compared with 54% in the 2025 survey and nearly all (93%), expect portfolio values to rise over the same period.
Of those planning to increase their portfolios, 70% say their decision is being driven by buying opportunities or valuations, while 58% point to strong rental demand, and 33% cite financing availability.
“The picture is not one of professional investors leaving the market wholesale. In fact, many remain confident that there is value to be had and are looking to grow,” said Sproule.
