A growing number of landlords are planning to reduce or exit their involvement in the private rental sector (PRS), according to the latest Landlord Trends report from Pegasus Insight (Q1 2025). The findings suggest increasing uncertainty and a notable shift in investment sentiment among property owners.

The report shows that 39% of landlords expect to leave the sector within the next five years. In the near term, 37% plan to reduce the size of their portfolios over the coming 12 months—an increase from 20% in Q1 2022.

Conversely, the proportion of landlords looking to increase their holdings has fallen significantly. Only 6% indicated plans to purchase more properties, down from 18% three years earlier.

The imbalance between sales and purchases has widened. In the past year, 22% of landlords sold property, while just 6% acquired new stock. The report highlights particularly strong activity among highly leveraged landlords—those with four or more buy-to-let mortgages. Within this group, 11% bought property, while 31% sold.

Only 28% of the properties sold by landlords are confirmed to have remained within the PRS. While 58% of new purchases were made from other landlords, a majority of those selling did so to owner-occupiers (67%), including 31% to first-time buyers. This suggests a potential net loss of rental stock, with only 28% of landlords reporting that they sold to another landlord.

Despite the movement out of the sector, key performance indicators within the PRS remain stable. Tenant demand continues to be strong, rental yields are relatively high, and long-term profitability has shown resilience.

The report notes that 73% of landlords observed strong tenant demand in their areas. Specifically, 37% described demand as “very strong” and 36% as “quite strong.” A further 18% reported demand as “average,” while only 3% cited it as “weak.”

The average gross rental yield stood at 6.3%, close to the recent high of 6.5% recorded in Q3 2024. Profitability levels, though slightly impacted in 2023 by rising interest rates, have otherwise remained stable over the past five years.

Commenting on the findings, Mark Long, founder and director of Pegasus Insight, said:

“These results suggest a large cohort of disillusioned landlords, worried about the future of the sector and further demands the government might place on them.

“Our research confirms that many landlords are deeply concerned about the impact of the Renters’ Rights Bill, energy efficiency requirements and a potential hike in Capital Gains Tax on buy-to-let property.

“The fact that so many feel impelled to sell up despite the underlying health of this market is particularly galling.”

Long added: “A proportion of the intended sales will be down to selective pruning by larger landlords, and some of the divested property will be hoovered up by other landlords.

“But there’s no doubt that the volume of stock in the PRS will reduce in the next 12 months. And as supply falls while demand remains strong, rents will inevitably rise yet further, hurting tenants.”

He concluded with a call for policy intervention: “The Government must wake up to the dangers of a shrinking PRS and change its approach to the landlords who provide homes for 19% of the UK’s population.

“Now is the time for policymakers to consult with the industry on ways to support landlords and encourage further investment in the PRS, before it is too late.”