The property rental market continues to show demand outpacing supply according to the latest RICS UK Residential Market Survey, out last week.
The survey measures agents’ sentiment across areas like demand, new landlord instructions and rent levels.
This month it says tenant demand rose, with a net balance of +14%, while landlord instructions remained negative at -17%.
The lettings market continued to face a supply-demand imbalance. Tenant demand increased during April, while landlord instructions remained in decline, reinforcing ongoing pressure on rental stock levels. A net balance of respondents expects rents to continue rising over the coming months, adding to concerns about affordability for private tenants who already spend 36% of income on rent.
Tarrant Parsons, RICS head of market research and analysis, said “April’s results show a housing market still in the grip of macro headwinds stemming from the Middle East conflict. Recent warnings from the Bank of England that interest rate rises may be required to tackle renewed inflation, driven by elevated oil prices and disrupted supply chains, underline the challenging environment facing buyers. Until there is a clearer path for inflation and borrowing costs, activity and sentiment look set to remain subdued, particularly across southern England and London where affordability pressures are most acute.”
Rent arrears reach new high record high
Average rental arrears reached a new high of £2,281 in the first quarter of the year, data from Reposit has shown.
However, with arrears increasing by just 2% year-on-year, the latest data indicates that the rate of growth has slowed, suggesting a gradual stabilisation in the market.
This marks a clear shift from the sharp rises seen in previous years when arrears surged by 27% between Q1 2023 and Q1 2024, followed by a further 23% increase between Q1 2024 and Q1 2025.
The deposit alternative service suggests that this picture is consistent with UK Finance data showing that at the end of Q4 2025, there were 9,520 buy-to-let mortgages in arrears of more than 2.5% of the outstanding balance.
This was in turn, down by 910 compared with the previous quarter, highlighting some early signs of improvement.
However, landlords and tenants continue to face affordability challenges, with interest rates remaining elevated at 3.75% and inflation averaging around 3.2% throughout Q1.
Ben Grech, chief executive of Reposit, said “we know that landlords are becoming increasingly risk-averse, placing greater emphasis on financial security and tenant reliability. While there are early signs that arrears are beginning to stabilise, they remain slightly elevated, as both landlords and tenants continue to feel the impact of sustained cost pressures. With the Renters Rights Act now in place and the abolition of Section 21 no-fault evictions, landlords are understandably becoming more cautious, given the reduced flexibility in how they manage tenancies.”
The average traditional deposit now stands at £1,308 which is £973 below the average arrears value
Grech claims that" in this environment solutions that reduce risk, improve affordability and provide greater protection for landlords will play a key role in supporting a more balanced and resilient rental market. At the same time, they enable renters to retain access to their money and use it for immediate needs, such as moving costs, or to invest for a return, rather than locking the money away for several years.”
The Government denies landlord exodus
The government claims there is no evidence of a landlord exodus, despite industry experts warning that the days of small landlords “are over”.
A story in The Telegraph reveals small landlords are selling their properties whilst larger and institutional landlords are snapping up homes.
The news comes as the Renters’ Rights Act came into force on 1 May 2026.
A Ministry of Housing spokesman claimed to The Telegraph that the Renters’ Rights Act has not caused a landlord exodus and the act will help landlords and tenants.
The spokesman told The Telegraph, “our landmark Renters’ Rights Act will bring the biggest upgrade to renters’ rights in a generation, while ensuring landlords have the stability and clarity they need. There’s no evidence of a landlord exodus, and good landlords who provide quality homes have nothing to fear from our reforms.”
However, figures by Auction House Kent to The Telegraph reveal the number of tenanted properties sold at auction jumped 70% in April compared with the same month last year as landlords looked to exit the market before the reforms came in.
The figures also reveal larger and professional landlords are snapping up properties as they are unfazed by the Renters’ Rights Act.
Philippa Martinez, at Auction House Kent, told The Telegraph “it is a good time for those larger landlords that run their properties like a business, are experienced in what they’re doing and are unfazed by the new reforms to snap up a deal and add to their portfolios”
Paul Shamplina, founder of Landlord Action, says a “landlord panic” before the Renters’ Rights Act has shifted the market towards larger investors. There has been an avalanche of landlords selling. If you’re geared up and understand regulation, you can scale up. There are institutional landlords piling in, but the days of the part-time, amateur landlord are well and truly over.”
Most landlords are still making money from their portfolios, though the Renters’ Rights Act is now weighing heavily on expectations for the months ahead.
Research from Aldermore found that 84% of landlords say their lettings activity is profitable, with average achieved yields reaching 6.5% in the first three months of the year.
That figure is up slightly on the previous quarter and matches the joint second highest quarterly yield recorded over the past five years.
However, profitability is not spread evenly across the sector with unencumbered landlords are more likely to report a profit than those with borrowing, at 90% compared with 77%.
Larger portfolio landlords are also reporting stronger levels of profit than smaller operators, with Aldermore pointing to a divide between more professional landlords and part-time investors.
Jon Cooper, the lender’s director of mortgages, said “If you’re a landlord or a broker, there are reasons to be hopeful here. Five out of every six landlords (84%) report their lettings activity being profitable. The average achieved yield is 6.5%, up slightly since last quarter.
Encouragingly, this is the joint second highest quarterly yield within the last five years. Generally speaking, we’re seeing that the more professional and sophisticated landlords are navigating the changing market with greater confidence, whereas part-time landlords with smaller portfolios can struggle to adapt.”
Tenant demand is still being described as strong by 58% of landlords, but that has fallen from 61% in Q4 2025 and from 73% in Q1 last year.
The fall has been persistent and in Q1 2024, 83% of landlords considered tenant demand to be strong, with the figure declining every quarter since then.
More landlords are now describing demand as average, while Aldermore also recorded a smaller rise in those reporting weak tenant demand.
Expectations for landlords’ overall lettings business have fallen to their lowest point since Q2 2023.
In Q1, 27% of landlords said they felt positive about their lettings business, compared with levels in the mid-30s during the previous two years.
The Renters’ Rights Act is a major concern in the research, with only 8% of landlords expecting the legislation to have a positive impact on their portfolios.
A further 16% expect no impact, while 70% expect a negative effect and 5% remain unsure.
Court capacity is also causing concern, with nine in 10 landlords worried about potential backlogs in the system for evicting tenants.
Landlord relationships are important factor
Tenant relationships with landlords and letting agents rank as the primary factor influencing long-term tenancy retention, according to research from estate agency group LRG.
The group’s Winter 2025/26 Lettings Report found that 68% of renters identified these relationships as the most important consideration when deciding whether to remain in their current property. This figure exceeds other factors including feeling settled in the area (50%), stability in personal circumstances (45%), and confidence in maintenance and management handling (44%).
The research indicates landlords share similar preferences for longer tenancies. Some 72% of landlords stated they prefer tenants who remain in a property indefinitely, compared with 28% who favour fixed-term arrangements. Among those preferring fixed terms, the primary motivations cited were to facilitate rent reviews, redecorating or tenancy management, rather than to regain possession.
The findings emerge as the private rented sector prepares for changes under the Renters’ Rights Act, which will introduce periodic tenancies as the default structure, replacing fixed-term agreements. According to LRG’s data, 24% of renters anticipate remaining in their current home for longer once periodic tenancies are implemented.
Market constraints influence retention
Limited housing availability appears to contribute to tenant retention patterns. Nearly half of respondents reported having fewer accommodation options compared to a year earlier, whilst 44% indicated increased difficulty finding properties within their budget. The report also noted a shift in tenant priorities, with 52% stating that long-term suitability now outweighs cost considerations when selecting a home.
Allison Thompson, National Lettings Managing Director at LRG, stated “the rental market is growing up. Tenants are not just looking for somewhere to live. They are looking for somewhere to settle. Landlords who prioritise tenant retention “will be the ones who come through the next few years in the strongest position.”
The data suggests the rental sector is experiencing a shift towards longer-term occupancy patterns, driven by both tenant preferences and market constraints, ahead of regulatory changes affecting tenancy structures.