The privately rented stock sales market continues to grow, as financial and regulatory pressures reshape investment decisions across the sector.
Rising mortgage costs, tighter lending conditions and changes related to the Tenant Rights Act are leading some landlords – particularly debt-reliant investors – to reevaluate the feasibility of owning a rental property. Those with higher leverage are seen to be at greater risk, with increased borrowing costs and compliance requirements impacting margins.
As a result, an increasing number of homeowners are choosing to sell, leading to an increase in housing stock in the sales market as well as a gradual reduction in the available rental supply. This trend is particularly evident among smaller portfolio landlords, many of whom are more sensitive to changes in interest rates and operating costs.
While larger, better-capitalized investors continue to expand or consolidate holdings, the exit of smaller landlords is contributing to a changing ownership profile within the private rented sector.
Jessica Tomlinson, research analyst at Savills, said: “The rental market is entering a new era, with the Tenant Rights Act gradually reshaping both landlord and tenant profiles.
“Although there has not been a mass exodus, higher costs, increased regulation and taxation have meant that some privately rented stock – particularly among smaller, credit-reliant landlords – is moving into the sales market. This has tightened supply, resulting in increased rental values. At the same time, we are seeing an increase in lease renewals as landlords look to secure high-quality tenants at strong rents ahead of the Act coming into force.
“In the longer term, these pressures are likely to shift a larger share of the market into the hands of larger, often more institutional landlords, who are better positioned to absorb regulatory change and invest with a long-term view.”
When asked what landlords are most concerned about, Savills agents ranked RRA top, followed by higher mortgage costs.
As a result, a majority of agents (62%) agree that the stock had already declined over the past three months.
The latest market trends are having an impact on markets across the country, including London, where values have increased, up 0.5% in Q1 26 and 1.1% year-on-year.
On an annual basis, lower-priced prime homes continue to perform better, with rents under £1,000 per week increasing by 3.3% on the previous year, while properties priced at £2,000 per week and above have declined marginally.
Tomlinson added, “Recent changes to non-dom tax rules, as well as higher stamp duty costs, are boosting international demand in the prime central London rental market. This is a trend that may be reinforced by the current global uncertainty, as we may see some tenants in the Middle East regard London as a bolthole in the short term.”
Outer prime London rental values have increased by 2.3% over the past year, supported by strong demand in family-oriented neighborhoods such as Clapham, Hampstead, Battersea and Chiswick, where the limited supply of high-quality homes continues to drive pricing down.
A similar pattern has emerged in major regional markets, with growth driven by outer commuter-belt hotspots including Farnham and Winchester, while regional towns and cities – where flats make up a larger share of the rental stock – have seen a more subdued performance.
Overall values in the South West and West London have increased by a significant 27% in the six years since the start of the pandemic (March 2020).
“In prime London and regional rental markets elsewhere, demand for houses has outweighed that for flats, which is weighing on prices. However, this balance may begin to change as higher interest rates delay first-time buyers’ purchases, retaining more young professionals in the rental sector and supporting demand in the near term,” Tomlinson said.