UK landlords are set to benefit from stronger rental yields as house price growth slows sharply, according to fresh forecasts from property consultancy Knight Frank. The firm predicts UK rents will climb by 4% in 2025 and a further 3.5% in each of the following two years, driven by landlord exits ahead of the Renters’ Rights Bill and tightening tax rules.
Rental demand strengthens as landlords sell
Knight Frank reports a growing number of buy-to-let investors are offloading properties, creating a supply squeeze in the rental market. “We think rental value growth will be marginally higher in 2026 as government initiatives produce unintended consequences—again,” said Tom Bill, head of UK residential research at Knight Frank. He warned that the forthcoming Renters’ Rights Bill could disrupt possession recovery and add costs, pushing some landlords to exit.
Ben Beadle, NRLA chief executive, has warned that “ever-growing regulation risks driving landlords out of the market and reducing choice for tenants,” while many investors cite EPC upgrade costs and tax uncertainty—including speculation about National Insurance on rental income—as reasons to sell.
House price forecasts cut sharply
While rents rise, Knight Frank has slashed its UK house price forecast for 2025 to just 1% growth, down from a previous 3.5% estimate, with a 3% rise expected in 2026. “The low point for the UK housing market was in April, when nil-rate stamp duty bands increased and global market jitters knocked confidence,” Bill explained. Despite three Bank of England rate cuts since January, mortgage costs have barely budged as markets had already priced in the reductions.
Data from UK Finance shows new mortgage approvals dipped slightly in August, reinforcing the subdued outlook. Yet sub-4% mortgage products have offered some stability for buyers, helping sales activity recover modestly after the spring lull.
Investor sentiment turns cautious
Estate agents report an 8% year-on-year fall in new buyer enquiries through August, while fresh listings have climbed 6%, much of it from former rental stock. “We’re seeing seasoned landlords cash in while prices are steady and before further regulation bites,” said north London letting agent Sarah Mitchell. She added that competition for quality rental homes remains “fierce,” allowing remaining landlords to raise rents without deterring tenants.
Editor’s view
Knight Frank’s figures underline a pivotal moment: a cooling sales market alongside a tightening rental supply. For landlords willing to hold their nerve, higher rents could offset regulatory headwinds, but the Renters’ Rights Bill—with its Section 21 ban and added compliance hurdles—may push more investors to exit. The coming year will show whether policy makers can protect tenants without driving out the very landlords who keep Britain’s rental market afloat.
