Despite a backdrop of strong fundamentals in the private rented sector (PRS), including robust tenant demand, record-high rental yields, and high profitability, landlords are increasingly pessimistic about the future under the current government. The latest research by Pegasus Insight highlights that 91% of landlords believe the new Labour government’s policies will have a negative impact on them, particularly in areas like Capital Gains Tax (CGT) reforms, rent caps, and the removal of Section 21, which allows for no-fault evictions. The looming changes have prompted a climate of uncertainty, with only 6% of landlords planning to expand their portfolios in 2025, while 41% anticipate selling properties in the coming year.

Many landlords cite rising costs, fears of tighter regulations, and potential tax reforms as factors driving their intentions to divest, particularly those with larger portfolios and leveraged properties. Among the concerns, a possible CGT increase is especially pivotal: if tax relief is reduced, 39% of landlords indicate they would stop investing in the PRS, with nearly half of those holding multiple properties considering selling.

Despite landlords’ concerns, the rental market itself remains robust. Tenant demand is high across most regions, and rental yields reached a decade-high average of 6.5% in Q3. Profits remain steady, with 70% of landlords making modest gains and 17% achieving higher profits. However, potential policy changes could impact tenants, with 26% of landlords indicating they would raise rents to offset losses from CGT reform.

Mark Long, director of Pegasus Insight, underscored the importance of government awareness: a significant CGT increase could drive rent hikes and reduce the availability of PRS properties, aggravating the already challenging supply-demand imbalance. He emphasized that the PRS, which houses nearly 20% of the population, is essential to national housing needs. Long hopes the forthcoming Budget will offer support for landlords, reassuring them of their role in the housing market and alleviating fears about government intervention.