Renters face a more expensive and more selective rental market, as professional property investors respond to the re-emergence of realistic gilt yields, rising operating costs and regulatory change by raising rents and reassessing tenant risk and selection criteria.
That's according to Handelsbanken's fifth annual Property Investor Report, which surveyed 200 UK real estate investors, property management professionals and landlords.
Almost two thirds, 63%, say higher overall costs have caused them to raise rents. The findings suggest the impact of higher overheads is not limited to rent rises, however. More than two fifths, 41%, of professional property investors say costs have prompted them to switch their tenant profile, for example by prioritising "lower risk" tenants. Separately, in response to the Renters' Rights Act, 59% say they are tightening tenant selection criteria, while 44% are considering raising rents earlier than planned.
The findings point to a rental market in which affordability and access are becoming increasingly connected. As landlords face higher operating, compliance and upgrade costs, some are not only raising rents but also becoming more selective about tenant risk, arrears exposure and long-term tenancy stability.
The cost base behind these decisions is broad, and the cost of capital has risen alongside it. Investors most commonly reported increases over the past 12 months in:
- maintenance or repairs, cited by 45%
- insurance, cited by 41%
- energy efficiency upgrades, cited by 40%
These core operating costs are linked to keeping rental properties safe, compliant, insurable and fit for long-term occupation.
The report also found evidence that rising costs are affecting wider portfolio decisions. One in five, 20%, of professional property investors say they've sold properties due to higher costs, while 19% say they have taken properties off the rental market. Meanwhile, 46% say higher costs have caused them to delay upgrades or improvement works, suggesting already tired housing stock may degrade further.
Handelsbanken's research found that the median cost of complying with the Renters' Rights Act is £5,000, while the mean is £31,411, pointing to a wide range of experiences across the sample.
The median expected annual compliance and upgrade spend over the next 12 months is £20,000, though this should be understood as a portfolio-level indicator among professional investors with sizeable portfolios, rather than a direct proxy for individual rent increases.
The private rental sector is being shaped by a more demanding regulatory and operating environment. Stronger tenant protections and higher property standards may support a better rental market over time, but Handelsbanken's research suggests the cost of adapting to that environment is already influencing landlord decisions on rents, tenant selection, upgrades and supply.
"The private rented sector is not simply becoming more expensive for landlords to operate, it is becoming more selective," said James Sproule, UK chief economist at Handelsbanken.
"Higher costs and greater tenant rights are feeding into rent decisions, but they are also changing how professional investors think about tenant risk, affordability and long-term portfolio planning.
"For renters, that means the challenge may not only be what they pay each month, but how competitive the market feels when trying to secure a suitable home or addition to their portfolio.
"It is important to be balanced. Higher standards and stronger tenant protections are intended to improve the rental sector over the long term. But they also come with real costs, and our research shows professional investors are already adapting their behaviour in response."
No investor exodus, but a more selective rental market
Despite these pressures, the report does not point to a wholesale retreat from the rental market among professional property investors.
84% plan to increase their portfolio holdings over the next 12 months, compared with 54% in the 2025 survey. Almost all respondents, 93%, expect their portfolio value to rise over the same period, with 38% expecting it to increase "a lot."
Among those planning to grow their portfolios:
- 70% say their decision is being driven by buying opportunities or valuations
- 58% point to strong rental demand
- 33% cite financing availability
This suggests that professional investors remain broadly confident in property as an asset class. The findings also show, though, that confidence is being accompanied by greater discipline around costs, tenant risk and portfolio planning.
"The picture is not one of professional investors leaving the market wholesale. In fact, many remain confident that there is value to be had and are looking to grow," Sproule continued.
"But a confident market is not necessarily an easier market for tenants. Higher costs are making landlords more selective, and that could shape the experience renters have in the year ahead through higher rents, more selective tenant criteria and greater competition for good-quality homes.
"The long-term aim should be a rental sector that offers better standards, clearer rights and more resilient properties. The challenge is making sure the transition does not put further pressure on tenants who are already navigating a more selective tenant criteria."
