The private rental sector has been under sustained pressure in recent years, with higher borrowing costs, tax and regulation and constant speculation about landlords exiting the market.
However, Allison Thompson, national lettings managing director at Leaders, one of the UK’s biggest national estate and lettings agencies, says the fundamentals still stack up. She argues it is still “a great time to be in the private rental sector,” particularly for landlords who understand how the market is shifting.
She points to the sector’s four key drivers: demand, she says, still outstrips supply across large parts of the country, rents are rising well above historic norms, mortgage rates are moving back down to long-term averages, and house price growth, over time, has typically kept pace with inflation.
Demand still outstrips supply
Thompson adds, though, that it is the imbalance between tenant demand and available homes that is currently one of the strongest drivers of the market.
According to the data, in England and Wales, the size of the private rented sector peaked in 2016/17, when it made up 20.3% of all housing stock, with around 4.8 million dwellings. By 2023, its share had fallen to 18.8%, while the overall number of homes in the sector had barely changed in seven years.
Over the same period (2016 and 2023), the population increased by almost 2.5 million people, or around 4.25%. Thompson says a large proportion of those additional residents require rented accommodation, ensuring continual upward pressure on supply.
She also highlights the growing role the private sector (PRS) is playing for those unable to access the social housing market. In England alone, there are now around 1.3 million households on the waiting list, which is the highest figure since 2014, and another 139,000 in Wales, with many of those temporarily housed in the PRS.
Rents rising above the historic norm
Rising rents are the second big cause for optimism for landlords, according to Thompson, who points out that there has been a sustained period of above-average growth in rents.
The average UK private rent has risen every month for the past three years at an annual rate above 5%, with an overall average uplift of 7.4%. That’s compared to historic averages of around 2%,
Mortgage rates moving back towards long-term averages
Thompson also highlights the recent shift in the outlook for mortgage finance.
After inflation began driving a sharp rise in rates in 2022, many landlords coming off fixed-rate deals saw their mortgage repayments increase significantly. However, mortgage rates have now come down much closer to their long-term average, typically around 4% to 5%, and are likely to come down even further during the course of 2026.
For those who weathered the peak in borrowing costs, this is likely to prove a key factor in stabilising balance sheets and restoring confidence in the sector.
Capital growth tends to keep pace with inflation
Nor, says Thompson, should landlords overlook their properties’ longer-term capital performance, which, historically, has more than kept pace with inflation.
In the five years between August 2018 and August 2022, the average UK house price rose by £51,506, equivalent to 24% growth or 4.8% per annum. Over the same period, terraced houses rose by an average of £47,292, up 27% or 5.4% per annum. Inflation during those five years averaged around 3.5% per annum.
Thompson adds it was a similar picture for the last decade, too. In that time, the average UK house price rose by £83,682, a 45% increase or 4.5% per annum, while terraced houses rose by £75,137, up 49.5% or 4.95% per annum. Inflation averaged just 3.9% per annum.
According to Thompson, the message for landlords is therefore that, despite all the changes, the underlying conditions remain strong for those who choose to remain in the market.
