Privately rented stock is continuing to move into the sales market, as financial and regulatory pressures reshape investment decisions across the sector.
Rising mortgage costs, tighter lending conditions and changes linked to the Renters’ Rights Act are prompting some landlords – particularly debt-dependent investors – to reassess the viability of holding rental assets. Those with higher leverage are seen as more exposed, with increased borrowing costs and compliance requirements impacting margins.
As a result, a growing number of landlords are choosing to sell, contributing to a gradual reduction in available rental supply while adding to housing stock on the sales market. The trend is particularly evident among smaller portfolio landlords, many of whom are more sensitive to shifts in interest rates and operating costs.
While larger, better-capitalised 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 Renters’ Rights Act gradually reshaping both landlord and tenant profiles.
“While there hasn’t been a mass exodus, higher costs, increased regulation, and taxation mean that some privately rented stock – particularly among smaller, debt‑dependent landlords – is continuing to move into the sales market. This has tightened supply, which in turn has kept rental values edging upwards. At the same time, we’re seeing an increase in lease renewals as landlords look to secure high‑quality tenants at strong rents ahead of the Act coming into force.
“Over the longer term, these pressures are likely to leave a greater share of the market in the hands of larger, often more institutional landlords, who are better positioned to absorb regulatory change and invest with a longer‑term view.”
When asked to rank what landlords are most concerned about, Savills agents ranked the RRA top, followed by higher mortgage costs.
As a result, the majority of agents (62%) agree that stock had already decreased over the past three months.
The latest market trend is having an impact of markets across the country, including in London, where values edged higher, rising by 0.5% in Q1 26 and 1.1% year-on-year.
On an annual basis, lower‑value prime homes continue to outperform, with rents below £1,000 per week increasing by 3.3% over the past year, compared with small falls among properties priced at £2,000 per week and above.
“Higher stamp duty costs, alongside recent changes to non‑dom tax rules, continue to funnel international demand into prime central London’s rental market. This is a trend that the current global uncertainty could reinforce, as we may see some tenants from the Middle East consider London as a bolthole in the short-term,” continued Tomlinson.
Outer prime London rental values increased by 2.3% over the past year, supported by strong demand in family‑focused neighbourhoods such as Clapham, Hampstead, Battersea and Chiswick, where a limited supply of high‑quality houses continues to underpin pricing.
A similar pattern has emerged across prime regional markets, with growth driven by outer commuter‑belt hotspots including Farnham and Winchester, while regional towns and cities – where flats make up a greater share of rental stock – have seen a more subdued performance.
Overall values across South West and West London have grown a significant 27% in the six years since the start of the pandemic (March 2020).
“Elsewhere across prime London and the regional rental markets, demand for houses has continued to outstrip flats, which is reflecting back on prices. However, this balance may begin to shift as higher interest rates delay first‑time buyer purchases, keeping more young professionals in the rental sector and supporting demand in the near term,” added Tomlinson.
