The firm’s Landlord Trends research found that average gross rental yields increased to 6.5% in Q1 2026, up from 6.4% in the previous quarter.
The research also found that 84% of landlords described their lettings activity as profitable, although this marked a second consecutive quarterly decline as rising operational costs continue to narrow margins for some landlords.
The proportion of landlords reporting losses fell from 6% in Q4 2025 to 4% in Q1 2026.
Performance varied across portfolio types and regions. Landlords operating HMOs recorded the highest average yields at 7.6%, outperforming the wider market average.
Regionally, the North West generated the strongest average returns at 7.1%, while London recorded the lowest yields at 5.3%, reflecting higher acquisition costs relative to rental income.
Pegasus Insight said tenant demand continues to support income stability across the sector, although demand has softened compared to a year ago.
Some 58% of landlords rated current tenant demand as strong, down 15 percentage points year on year.
Separate tenant research conducted by Pegasus Insight among 3,000 private renters found that the average tenant has lived in their current property for 5.3 years. Two thirds said they planned to remain beyond their current tenancy agreement, intending to stay for a further 4.3 years on average.
Just 17% of tenants said they planned to leave their current property, with most citing reasons such as relocation or upsizing rather than dissatisfaction with their tenancy. More than two thirds described their recent rental experience as positive.
Mark Long, founder and managing director at Pegasus Insight, said: “The stabilisation of yields at 6.5% is a more encouraging signal than it might first appear. Coming after a period of gradual softening, it suggests the sector has found a degree of equilibrium, at least for now, even as regulatory complexity and cost pressures continue to intensify.
“What the data consistently shows is that profitability is increasingly a function of portfolio structure. HMO landlords, those with larger portfolios and those operating through limited company structures continue to demonstrate greater resilience, while more traditionally structured portfolios have less of a buffer as costs remain elevated.
“The tenant picture is genuinely important context here. Long tenures, strong satisfaction scores among those with direct landlord relationships, and continued intention to stay all point to an occupancy base that is far more stable than the regulatory debate might suggest.”
