The majority were profitable, according to Pegasus Insight landlord trends research, with 84% of landlords describing their lettings business as profitable.
However, it marked the second straight quarterly decline as the gap between income and rising operating costs continued to narrow for some.
The proportion of owners making a loss fell to 4% in the first quarter of the year (Q1), down from 6% in Q4 2025. This suggests that the picture remains under control for the majority despite the increasingly demanding operating environment.
It was Home Owners in Multi Occupation (HMOs) who were hailed as ‘outstanding performers’, recording average returns of 7.6%. This was far ahead of the market-wide figure.
When it came to location, the Northwest had the strongest returns, with an average return of 7.1%.
Meanwhile, London landlords continued to achieve the lowest ratio, at 5.3%, reflecting the capital’s higher acquisition costs compared to rental income.
Although landlords were facing pressure, demand from tenants was providing a supportive backdrop, Pegasus Insight found.
More than half of landlords, 58%, rated tenant demand as strong, although this figure has fallen by 15% compared to the same period last year.
Tenant trends research conducted on 3,000 private tenants confirmed that there is a stable occupancy base. The typical tenant has now lived in their current property for an average of 5.3 years, a number that is gradually rising, and two-thirds say they plan to stay beyond their current agreement, intending to stay for a further 4.3 years on average.
Only 17% of renters plan to leave their current property, with most citing personal circumstances such as moving or upsizing rather than dissatisfaction with their tenancy.
More than two-thirds rated their recent rental experience as positive – a number that has remained consistent year-on-year.
Mark Long, founder and managing director of Pegasus Insight, said: “Yields stabilizing at 6.5% is a more encouraging sign than it might appear at first glance. It comes after a period of gradual slowdown, and suggests that the sector has found a degree of balance, at least for now, even as regulatory complexities and cost pressures continue to intensify.”
“What the data consistently shows is that profitability is increasingly dependent on portfolio structure. HMO owners, those with larger portfolios and those operating through limited company structures continue to show greater flexibility, while more traditionally structured portfolios have less buffer as costs remain high.
“Tenant profile is a really important context here. Long tenures, strong satisfaction scores among those with direct relationships with the landlord, and a continued intention to stay, point to a much more stable occupancy base than the regulatory debate might suggest. For lenders and investors, this fundamental stability is a key part of the investment case for buy-to-let.”
“The challenge for this sector is to translate this structural stability into sustainable confidence. With landlord sentiment remaining weak and disinvestment continuing to outpace takeovers, supply remains under pressure. How the market responds once the Tenants’ Bill of Rights is triggered will be the defining question for next year.”
