Landlords retaining portfolios see yields rise to 9%

Landlords who retained their rental properties in recent months are experiencing stronger tenant demand and improved yields, according to a London-based agency operating in the UK’s major cities.

Virelle Group, which specialises in new build rentals and property management across London, Manchester and Birmingham, reports a shift in landlord behaviour following a period of significant portfolio sales earlier in the year.

Emily Robison, Director at Virelle Group, said: “Despite a number of new legislations and tax implications, we are now seeing an increasing number of landlords holding on to their portfolio rather than selling.”

Market dynamics driving retention

The agency identifies two primary factors behind the trend. The sluggish sales market has led to significant falls in apartment values, meaning many landlords would realise losses if they sold. Additionally, the Renters’ Rights Act and forthcoming tax changes on rental incomes from April 2027 prompted substantial property sales earlier this year.

This has created a supply shortage in the rental market. Virelle Group estimates that properties previously yielding 4-5% annually could now generate 7-9%, though these figures have not been independently verified.

The context follows recent declines in UK house prices, which have affected the sales market across multiple property types.

Interest rate impact

Robison added: “In light of the Bank of England’s recent decision to increase interest rates to 4%, we expect more aspiring homebuyers to put their property search on hold and continue to rent, resulting in further growth for the UK rental sector and opportunities for landlords.”

The observation aligns with broader forecasts of continued pressure on house prices, which may further impact the balance between rental and sales markets.

Data from Chestertons last month indicated that approximately one in four London landlords who listed properties for sale following the Act’s introduction have subsequently re-let them instead.

Outlook

The rental market dynamics reflect a combination of regulatory changes, tax policy shifts and broader economic conditions affecting both landlords’ exit strategies and tenant demand patterns across major UK cities.