Landlords set for a steady 2026 as mortgage and rental markets stabilise

UK property is heading for a year of modest gains rather than dramatic swings, with fresh forecasts for 2026 pointing to subdued growth in both prices and rents as confidence cautiously returns.

Chestertons expects rents to rise by 2% in Greater London next year and 3% in the priciest postcodes.

It says that strong tenant demand persists and this is being matched by enough rental stock to prevent runaway inflation.

After fears that the Renters’ Rights Act would trigger a landlord sell-off, many owners have chosen to stay in the market instead, supporting stability.

However, the agency says the biggest brake remains on tenant affordability who are spending around 40% of income on rent.

House prices up

Chestertons believes house values across the country, including Greater London, will edge up by around 2% in 2026, with prime central London expected to see prices rise by 1%.

Lower borrowing costs and clearer tax policy following the Autumn Budget should help unlock demand that stalled in late 2025.

However, weaker economic momentum and stretched affordability mean buyers will remain selective.

A spokesperson for Chestertons said: “If the sales market improves as anticipated, some landlords may be able to sell rental properties they had previously held back, potentially reducing rental supply.

“Combined with the ongoing strong tenant demand, this could cause rents to resume their upward trajectory, underpinning the modest growth we expect across Greater London and prime central.

“The Renters’ Rights Act will restrict most landlords from accepting offers above asking price and asking prices may increase slightly as a result of this.”

IMLA predicts BTL growth

The Intermediary Mortgage Lenders Association (IMLA) expects gross mortgage lending to reach £320bn in 2026 and £350bn in 2027.

House purchase loans will drive most of this expansion as rates decline and affordability improves.

Buy to let lending is set to climb from £39bn this year to £44bn in 2026 and £48bn in 2027, helped by stronger yields.

It says that while less committed landlords sell up, more specialised operators are expected to fill the gap.

The organisation’s executive director, Kate Davies, said: “The housing and mortgage markets continue to play a vital role in supporting the wider UK economy, and our forecasts show that they are set to remain a source of resilience and growth through 2026 and 2027.

“Falling interest rates, rising transaction levels and a recovering buy to let market all point to a more positive outlook for lending activity.”

Goodlord sees smaller landlords quit

It’s not all good news for 2026 with Tom Goodman, the managing director at the Goodlord Group, predicting smaller landlords will leave the sector.

He said: “In 2026, more smaller landlords will decide it isn’t worth it anymore and smaller agencies will also look to exit.

“The regulatory pressure, the compliance burden, the margin squeeze: it adds up.

“The ones staying in are either scaling up or finding a specific niche they can own.”

Younger landlords are ‘digitally native’

Mr Goodman also sees a generational shift taking hold and adds: “The landlords coming into the market now are more digitally native.

“They’ve grown up with different expectations around communication, transparency, and data access.

“Agencies still operating the way they did five years ago are going to struggle to win them.”

Plus, longer-term renting is set to become the norm and he continued: “Periodic tenancies are making people nervous about churn, but I think the opposite will happen in reality.

“With supply and demand where it is, tenants are going to want to stay put.

“We’re moving toward something closer to the German model – people renting for years, not months.”