Buy-to-let investment is showing early signs of recovery despite higher tax on landlords’ rental profits, according to Chestertons’ latest market analysis.
UK Finance data show 16,026 properties were bought with buy-to-let mortgages across the UK in the second quarter of 2026, up 23% on the same period in 2025.
Rightmove reports that average rental yields in London rose from 5.7% to 6.1% over the past year, the largest increase of any UK region. Strong tenant demand and a shortage of available properties continue to support rental values.
Rightmove’s Rental Trends Tracker put average monthly asking rents in London at £2,825 in the third quarter of 2026, up 3.2% year on year, against annual growth of 2.4% across the rest of Britain. Zoopla reports that the number of homes available to rent across Inner London fell by 13% over the past year.
The October Budget further increased income tax on rental profits for individual landlords, adding to existing pressure from regulation and borrowing costs.
“Despite the additional tax pressures facing individual landlords, we’re seeing opportunities for investors purchasing through limited companies, particularly those looking to build or expand their rental portfolios,” said Katinka Hill, head of lettings.
“Renewed buy-to-let investment would be welcome news for London’s rental market, helping to maintain the supply of homes available to tenants while offering investors the potential for longer-term returns.”
New tenant registrations rose 4.1% year on year in October, ahead of the 3.6% average for the year to date. Property portal enquiries remained broadly stable, up 0.2%. The ratio of portal enquiries converting into tenant registrations reached 0.63, its highest level for seven months and above the 0.61 recorded a year earlier.
The number of landlords lowering their initial asking rents fell by 13.1% year on year, compared with a 9.1% reduction for the year to date.
“For buy-to-let landlords, this is encouraging news,” Hill added. “Rising rents and improving yields are creating opportunities for investors, although choosing the right property and setting a realistic asking rent remain essential to securing reliable tenants and minimising void periods.”
On the sales side, portal enquiries rose 2.8% year on year in October and new buyer registrations rose 6%, the first time in over a year that both measures have recorded annual growth. Several mortgage lenders have reduced fixed rates following an easing in Government borrowing costs, while the Bank of England raised its base rate from 3.75% to 4% in November.
“Despite uncertainty ahead of the Budget, we saw encouraging signs of renewed buyer confidence in October, with both enquiries and registrations increasing year-on-year for the first time in over a year,” said Adam Jennings, head of residential.
“Since the summer, we’ve also seen more sellers who had previously put their plans on hold deciding to move forward, bringing additional properties to the market.
“Although buyers remain price-conscious, the increase in activity on both sides of the market is encouraging. With much of the uncertainty surrounding the Budget now behind us, we expect confidence to continue improving in the months ahead.”
