The UK’s private rented sector has experienced its largest decline this century. In 2025 alone, for example, the private rented sector lost £48bn in market value. Although the UK property market increased by 3.8%, the private rented sector declined by 5.1%. This signifies the third consecutive year of decline, a £79bn reduction in market value since 2022.
This market phenomenon has elicited major concerns, particularly the causal factors behind the noteworthy decline in the market value. By the same token, however, it is worth stressing that many landlords are strategically shifting towards limited companies, forfeiting maximising on short-term profit in order to capitalise on long-term yield.
Declining Market
According to the National Residential Landlords Association, 26% of landlords plan on selling within the next year; only 6% intend to expand their property portfolios. ‘With over 18.000 rental properties lost from the market in just nine months’, Jason Harris-Cohen, the managing director of Landlord Buyers, explained: ‘we’re witnessing one of the most significant contractions in the UK’s private rental sector in decades.’
Harris-Cohen touched on the major contributing factors behind landlords deciding to exit the private rented sector: ‘Landlords are being squeezed by rising taxes, tightening legislation, and increasing maintenance costs, many feel they have no choice but to sell.’
The demand for rental homes, according to Zoopla, has decreased by 14% compared to a year ago, standing at its lowest in over six years. Further, the competition for rental properties has fallen from 6.5 enquiries per property in 2025 to 4.8 enquiries per property in 2026.
Underpinning these metrics is the aggregate decline of rental growth from 2.8% last year to 1.9% this year, although it is worth noting that rental increases have seen significant growth in locations such as Manchester (12.3%), Bristol (11.8%), Birmingham (10.7%), Cardiff (10.1%), and Leeds (9.6%).
Tom Bill, the head of UK residential research at Knight Frank, observed that there is an expectation that ‘upwards pressure on rents [is] expected to intensify this year due to the arrival of the Renters’ Rights Act in May.’ ‘Any extra inconvenience around setting rents or regaining possession of a property’, Bill continued, ‘may prompt more landlords to sell and keep supply tight’.
This concatenation of factors is causing some landlords, concerned about the diminishing returns of remaining in the market, to reconsider whether to stay or exit the private rented sector.
Market Reorganisation
Yet the current picture of the private rented sector is incomplete. According to the LRG’s Winter 2025/26 Lettings Report, 51% of landlords plan to maintain or increase their property portfolios following the Autumn Budget.
The private rented sector has been reorienting towards limited companies as the vehicle for property portfolio growth. The share of landlords operating through limited companies has almost doubled since 2018. 67,114 new limited companies, per LRG, were incorporated under the buy-to-let SIC code in 2025, which is a 21% increase compared to 2024.
On average, a landlord operating through a limited company structure holds 15.9 properties, compared with 4.9 for landlords not operating through a limited company. In addition, 35% of limited company landlords own at least one HMO property, while only 17% of individual landlords own a single HMO property.
Because of the wider portfolios the average limited company landlord possesses, this has widened the opportunities for landlords to consider selling off properties to prospective buyers, chief among whom are first-time buyers. The latest data reveals that 34% properties sold by landlords were first-time buyers, while 29% were purchased by other residential buyers. Yet another significant sector of exchange is among fellow landlords, with 30% of properties being exchanged between existing landlords.
As such, Mark Long, the founder and director of Pegasus Insight, observed: ‘Landlord sales do not automatically mean a rental property disappears from the sector. In a meaningful minority of cases the property is simply being transferred from one landlord to another, and sometimes sold with tenants already in place.’
Allison Thompson, the national lettings managing director of LRG, argued that landlords who are committed to remaining in the market ‘are doing so strategically, with affordability and tenant retention at the centre of their thinking rather than short-term yield.’ ‘That’s a meaningful shift,’ Thompson concluded, ‘and one that’s good for the long-term health of the private rented sector.’
Market Health
While the market data does indicate that some landlords have been exiting the private rented market, many landlords are committed to remaining active in the market. This commitment is underscored by an increasing number of landlords opting to set up limited companies. Doing so has allowed landlords to enlarge their property portfolios, thereby offering broader flexibility in terms of retaining and selling their properties.
Because of this broader flexibility, this has enabled landlords to exchange their properties – be it tenants, prospective buyers, or other landlords – while still maintaining large property portfolios.
