Gross yields edged up slightly to 6.4% from Q4 2025, but this still represents a slip from 6.6% in Q3.
Houses of multiple occupation (HMOs) remain the top performers for landlords, recording average yields of 7.6% – well ahead of the market-wide figure. Their yields rose from 7.3% last quarter.
Mark Long (pictured), founder and managing director of Pegasus Insight, said the figures showed that the market had “found a degree of equilibrium”.
He added: “The stabilisation of yields at 6.5% is a more encouraging signal than it might first appear.
“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.”
EPC planning: act now or risk the rush later
Sponsored by BM Solutions
At the regional level, landlords in the North West are achieving the highest yields, with average yields of 7.1%, while London-based landlords continue to achieve the lowest, at 5.3%, reflecting the capital’s higher acquisition costs relative to rental income.
Tenant demand remains strong
The data showed an encouraging picture in terms of tenant demand and desire to stay in their properties.
The typical renter has now been in their current property for an average of 5.3 years, a figure that has been gradually rising, and two-thirds said they plan to stay beyond their current agreement, intending to remain for a further 4.3 years on average. Just 17% of tenants plan to leave their current property, with most citing personal circumstances such as relocating or upsizing rather than dissatisfaction with their tenancy. Over two-thirds rated their recent rental experience as positive – a figure that has held steady year-on-year.
More than half of landlords – 58% – rated current tenant demand as strong, though this figure has eased by 15 percentage points compared with the same period a year ago, reflecting a gradual softening in the intensity of demand as the market rebalances.
Long added: “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. The challenge for the sector is translating that structural stability into sustained confidence. With landlord sentiment still subdued and divestment continuing to outpace acquisition, supply remains under pressure. How the market responds once the Renters’ Rights Act beds in will be the defining question for the year ahead.”
