Rental yields across the private rented sector (PRS) have remained stable at 6.5% in Q1, following a period of "modest softening", Pegasus Insight has found.

The firm’s latest Landlord Trends report revealed that gross yields edged up slightly from 6.4% in Q4 2025.

Pegasus Insight stated that overall profitability has remained solid, with 84% of landlords describing their lettings activity as profitable, although this marks a second successive quarterly decline as the gap between income and rising operational costs continue to narrow for some.

The proportion of loss-making landlords fell from 6% in Q4 2025 to 45%. The consultancy services firm said this suggests that the picture "remains manageable for the majority", despite a demanding operating environment.

Meanwhile, performance continues to vary across portfolio types, with landlords operating HMOs being the standout performers, with average yields of 7.6%.

At the regional level, the North West (7.1%) is generating the strongest returns, with London-based landlords continuing to achieve the lowest, reflecting the capital’s higher acquisition costs relative to rental income.

Founder and managing director at Pegasus Insight, Mark Long, said: "The stabilisation of yields at 6.5% is a more encouraging signal than it might first appear. Coming after a period of gradual softening, it suggests the sector has found a degree of equilibrium, at least for now, even as regulatory complexity and cost pressures continue to intensify.

"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."

While the report does highlight the pressures facing landlords, Pegasus Insight found that tenant demand continues to "provide a broadly supportive backdrop".

Almost three in five (58%) landlords said current tenant demand is strong, although this figure has fallen by 15 percentage points year-on-year, which the firm said reflects a "gradual softening in the intensity of demand".

The data comes after its Wave 1 2026 Tenant Trends research revealed that the typical renter has been in their current property for an average of 5.3 years. This figure has increased gradually over the past year, with two thirds planning to stay beyond their current agreement, intending to stay for a further 4.3 years on average.

Long concluded: "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."

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