Almost two-thirds of professional landlords have increased rents in response to rising costs, while many are also becoming more selective about who they let to, according to Handelsbanken’s latest Property Investor Report.

The bank surveyed 200 UK property investors, landlords and property management professionals and found that 63% had raised rents as higher borrowing, maintenance, insurance and compliance costs continue to affect the private rented sector.

The research also found that 41% of respondents have changed the type of tenants they target, prioritising what they consider to be lower-risk applicants.

Separately, 59% said the forthcoming Renters’ Rights Act had prompted them to tighten tenant selection criteria, while 44% are considering bringing forward planned rent increases.

Handelsbanken says the findings indicate that rising operating costs are affecting not only rental prices but also landlords’ approach to tenant risk, arrears exposure and long-term tenancy stability.

Maintenance and repairs were the most frequently cited cost pressure, identified by 45% of respondents, followed by insurance (41%) and energy efficiency improvements (40%).

The report also suggests higher costs are influencing investment decisions. One in five landlords (20%) said they had sold properties because of rising costs, while 19% had removed properties from the rental market altogether.

Meanwhile, 46% said they had delayed upgrades or improvement works, raising concerns that investment in existing rental housing could slow.

Among those surveyed, the median estimated cost of complying with the Renters’ Rights Act was £5,000, although the average figure was £31,411, reflecting significant variation between portfolios. The median expected spend on compliance and property upgrades over the next 12 months was £20,000.

Handelsbanken says the private rented sector is operating in an increasingly demanding regulatory environment, with landlords balancing higher operating costs, compliance requirements and investment decisions alongside the introduction of stronger tenant protections.

James Sproule, UK chief economist at Handelsbanken, commented: “The private rented sector is not simply becoming more expensive for landlords to operate; it is becoming more selective.

“Higher costs and greater tenant rights are feeding into rent decisions, but they are also changing how professional investors think about tenant risk, affordability and long-term portfolio planning. For renters, that means the challenge may not only be what they pay each month, but how competitive the market feels when trying to secure a suitable home or addition to their portfolio.

“It is important to be balanced. Higher standards and stronger tenant protections are intended to improve the rental sector over the long term. But they also come with real costs, and our research shows professional investors are already adapting their behaviour in response.”

Despite these pressures, the report does not point to a wholesale retreat from the market among professional property investors.

Some 84% plan to increase their portfolio holdings over the next 12 months, compared with 54% in the 2025 survey. Almost all respondents, (93%), expect their portfolio value to rise over the same period, with 38% expecting it to increase “a lot”.

Among those planning to increase their portfolios, 70% say their decision is being driven by buying opportunities or valuations, while 58% point to strong rental demand, and 33% cite financing availability.

This suggests that professional investors remain broadly confident in property as an asset class. However, the findings also show that confidence is being accompanied by greater discipline around costs, tenant risk and portfolio planning.

Sproule continued: “The picture is not one of professional investors leaving the market wholesale. In fact, many remain confident that there is value to be had and are looking to grow.

“But a confident market is not necessarily an easier market for tenants. Higher costs are making landlords more selective, and that could shape the experience renters have in the year ahead through higher rents, more selective tenant criteria and greater competition for good-quality homes.

“The long-term aim should be a rental sector that offers better standards, clearer rights and more resilient properties. The challenge is making sure the transition does not put further pressure on tenants who are already navigating a more selective tenant criteria”.