The private rental sector (PRS) has continued to deliver stable returns and shown early signs of improving landlord confidence despite ongoing cost and regulatory pressures, research by Foundation has revealed.

The specialist lender’s latest Landlord Trends report, which was conducted in partnership with Pegasus Insight, found that 84% of landlords have reported their lettings activity being profitable, underlining the “continued strength” of the buy-to-let model even as operating costs rise.

At the same time, average rental yields rose to 6.5%, while both portfolio values and rental income increased quarter-on-quarter. Foundation said this points to sustained underlying asset performance.

Furthermore, the lender stated that these figures "demonstrated the resilience" of professional landlords, many of whom continue to adapt their strategies in response to changing market conditions, with a focus on long-term income and capital growth.

Alongside this resilience, Foundation believes that confidence levels show "tentative signs of recovery". The NRLA’s landlord confidence measure rose across all regions in Q1, while the proportion of landlords planning to remain in the sector increased from 58% to 61% quarter-on-quarter.

References to leaving the market have fallen, suggesting that while challenges remain, many landlords are adjusting rather than exiting.

The specialist lender found that 61% of landlords expect to increase rents over the next 12 months, with an average projected rise of 5.7%. Foundation said this reflects a market that is beginning to stabilise after a period of sharper increases, with landlords balancing cost recovery against tenant affordability.

Director of sales at Foundation, Grant Hendry, said the data shows a landlord community and wider PRS that "continues to prove its resilience".

He concluded: "While landlords are clearly facing a range of challenges, from rising costs to regulatory change, the fundamentals remain strong. Profitability is holding up, yields are stable, and we’re seeing early signs that confidence is beginning to return.

"At the same time, we shouldn’t ignore the pressures that remain. Softer tenant demand and rising voids show this is a more balanced market than in recent years, and some landlords will continue to reassess their position. However, the overall picture is one of a sector that is evolving rather than retreating.

"For brokers, this creates a significant opportunity. Landlords need support to navigate an increasingly complex landscape, whether that’s around portfolio structuring, refinancing or funding improvements. Specialist lenders and brokers therefore have a key role to play in ensuring landlords can continue to operate successfully and take advantage of the opportunities that still exist."

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