New research from Kensington Mortgages, which is part of Barclays, shows that confidence among UK-based residential limited company landlords remains strong, despite rising costs and increasing regulatory pressure. The findings suggest that most landlords are still positive about the long-term direction of the private rental sector, even as they prepare for a more challenging operating environment.
According to the research, which forms part of Kensington Mortgages’ BTL Barometer, 89% of landlords say they are confident about the long-term outlook for the rental market. This high level of optimism is further reinforced by expectations around performance, with 84% of landlords predicting that rental yields will increase over the next 12 months.
Alongside this, expectations for demand remain positive. Around 80% of landlords believe that rental demand will continue to rise, suggesting ongoing pressure in the housing market that could support rental pricing. In addition, 77% of respondents expect property values to increase over the same period, indicating confidence not just in rental income, but also in capital growth.
However, the survey also highlights a number of growing challenges facing landlords. A significant proportion are anticipating increased costs across multiple areas of their portfolios. Around 77% expect mortgage costs to rise, reflecting ongoing pressure from interest rates and lending conditions.
At the same time, 81% of landlords report that day-to-day running costs are increasing. These include essential expenses such as repairs, insurance, utilities, and general property maintenance. This suggests that operational margins may continue to come under pressure, even where rental income remains stable.
Regulation is also a key concern for the sector. Nearly eight in ten landlords (79%) believe that the regulatory environment will become more difficult in the coming year. This reflects ongoing uncertainty around legislative changes and compliance requirements, which many landlords feel could increase administrative and financial burdens.
When asked about the main factors influencing their confidence, interest rates were identified as the most important issue, cited by 31% of landlords. Regulation followed at 26%, while both property prices and rental demand were highlighted by 25% each. Broader economic conditions and mortgage availability were both noted by 22%, while taxation was also a concern for 20% of respondents.
Despite these pressures, the majority of landlords are not planning to exit the market. Just over half (53%) said they intend to keep the size of their portfolios unchanged over the next year. Meanwhile, only 8% are considering reducing their holdings, suggesting that large-scale withdrawal from the sector remains limited.
In contrast, a notable proportion of landlords are still looking to grow. Around 38% said they plan to expand their portfolios, indicating continued appetite for investment in property despite the current challenges. This suggests that confidence in the long-term fundamentals of the market remains relatively strong.
Diversification is also becoming a key strategy for many landlords. A large majority, 95%, say they are looking to diversify their holdings in some way. Popular options include corporate lets, which were selected by 37% of respondents, followed by larger Houses in Multiple Occupation (HMOs) with six or more bedrooms at 18%. Family homes accounted for 17%, while single-tenant properties made up 13%.
Interestingly, fewer than 1% of landlords said they intend to fully exit the buy-to-let market within the next 12 months. This indicates that, while some portfolio adjustments are taking place, widespread withdrawal from the sector is not currently a major trend.
Access to finance also appears to be relatively stable for many investors. Around 74% of landlords reported that they currently find it easy to access buy-to-let mortgage funding. This suggests that, despite economic uncertainty, lending conditions remain broadly supportive for a large proportion of the market.
The research also highlights a continued preference for operating through limited company structures. More than half of landlords using this model (53%) hold their entire property portfolio within a limited company. This structure is often used for tax efficiency and portfolio management purposes, particularly among more active investors.
Landlords who hold properties both personally and through a company reported slightly higher average gross rental yields from their limited company portfolios. On average, yields stood at 5.04% for company-held properties, compared with 4.88% for those held personally. While the difference is relatively small, it may reinforce the appeal of the corporate structure for some investors.
In terms of property types, family homes remain the most common asset class within landlord portfolios, accounting for 40% of holdings. This is followed by larger HMOs with six or more bedrooms at 35%, and single-tenant residential properties at 33%.
Other property types are less prevalent. Smaller HMOs account for 27% of holdings, holiday lets make up 16%, and student accommodation sits at 12%. This distribution suggests that many landlords continue to focus on more traditional, stable rental properties rather than specialist or seasonal markets.
Looking at recent investment trends, landlords report that they have primarily been increasing their exposure to family homes, single-tenant properties, and larger HMOs. These categories have seen the strongest growth in portfolios over recent years, reflecting a preference for more predictable rental demand.
Commenting on the findings, Allison Buckley, chief executive officer of Kensington Mortgages, said the results underline the resilience of today’s limited company landlords. She noted that despite rising operating costs, higher mortgage expenses, and increasing regulatory complexity, landlords remain committed to the sector.
She also highlighted that strong tenant demand and expectations of improving yields continue to support confidence. In her view, these factors are helping to offset some of the challenges facing landlords, particularly in relation to costs and compliance.
Overall, the research paints a picture of a rental market that is both confident and cautious. On one hand, landlords remain optimistic about demand, yields, and long-term growth. On the other, they are clearly aware of rising costs, regulatory pressure, and economic uncertainty.
The result is a sector that is adapting rather than retreating. Most landlords appear focused on adjusting their strategies, whether through diversification, tighter portfolio management, or more selective investment decisions, rather than exiting the market entirely.
As conditions continue to evolve, the balance between opportunity and pressure will likely remain a key theme for the private rental sector. For now, however, the data suggests that confidence is holding firm, even as landlords prepare for a more complex operating environment.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property