In recent years, the private rented sector (PRS) in London has looked increasingly precarious for many landlords.
Rising costs, regulatory risk and weakening returns threaten to turn what once was a steady income stream into a loss-making burden.
Below we combine data on rental yields, property price trends and looming reforms (notably the Renters’ Rights Bill) to show that landlords with weaker margins may already be walking a financial tightrope — and that the time to consider an exit may be now.
Weak Yields in London’s Rental Market
What the numbers say
- According to Intracapital Estates, average rental yields in Greater London in 2025 hover around 4.19 %, with inner-London boroughs such as Westminster and Kensington seeing yields between 2.5 % and 4.5 %. Intra Capital
- The global property guide reports that for prime London properties the gross yields are even more compressed: a 1-bed in Westminster (at its high property price) might deliver ~5.5 %, a 3-bed ~4.46 %, and 4-beds closer to 3 % or lower. Global Property Guide
- Local commentators put “good yields” in London at 4 %–6 %, with anything above 6 % being rare. J Property Management+1
- Zoopla’s 2025 rental market report suggests that investment levels in London are “lower”, and average yields in the capital are now “a more modest 5 %.” Zoopla
These are gross yields, before accounting for mortgage interest, voids, maintenance, management fees, compliance costs, insurance, agents’ fees, and taxes. As a rule of thumb, net yields after those deductions often shrink by 20–40% (or more, depending on financing structure).
In many cases, a gross yield of under 4 % effectively means there is little margin to absorb additional cost pressures.
The sales side: stagnation and softness in property values
While London still commands strong premium values in some pockets, the market is no longer universally booming:
- The Telegraph noted charts showing that many UK house prices are already “crashing” or showing clear signs of strain. Telegraph
- A Yahoo-News article summarised that prime London property values fell ~2.9 % in 2024 and, on average, the market is ~8.4 % below earlier peaks (e.g. 2014) in many areas. Yahoo News
- In late 2024, house prices across the UK saw the first annual asking price decline since January, on increased tax speculation and weaker buyer demand. thenegotiator.briefyourmarket.com
- Kirstie Allsopp has directly warned that “the property market is dead,” pointing to the difficulty not just in selling tenant-occupied properties, but in getting decent prices at all. (Her recent public commentary emphasises market stasis rather than exuberance.) Telegraph+1
In short: yields are under pressure, and capital growth as a backstop is far less reliable than in past cycles.
Extra Cost Pressures: Regulation, EPCs, Tax, and Rent Caps
Add to weak margins the coming regulatory and fiscal changes, and many London landlords may find themselves squeezed—or even in negative cash flow.
The Renters’ Rights Bill
The Renters’ Rights Bill (introduced in 2024, currently in committee) aims to significantly reshape the landlord–tenant balance. Wikipedia Key elements that affect landlords include:
- Abolition (or severe restriction) of fixed-term assured shorthold tenancies, moving toward rolling tenancies
- Greater obligations on landlords for property condition, maintenance and tenant protection
- Stronger enforcement powers (e.g. rent repayment orders) through local authorities
These reforms are widely viewed as a move toward stabilising rent rises (i.e. limiting sharp upwards rent shocks) and increasing the regulatory burden on landlords.
Because the Bill is active in Parliament, and is expected to pass with Royal Assent in due course, its changes are not speculative—they are a credible immediate risk.
EPC, Net Zero and Compliance Costs
Already, landlords face rising costs to satisfy Minimum Energy Efficiency Standards (MEES). Several trends intensify this:
- New proposals envisage raising the minimum EPC standard to a “C” for many rental properties. Some commentators call this a “yet another reason” not to invest in buy-to-let. benhams.com
- Upgrades (insulation, heating systems, glazing, ventilation) often require heavy capital outlay, and in older London buildings (solid walls, Conservation Areas) retrofits are especially expensive.
- On top of capital expenditure, there are ongoing maintenance, certification and compliance reporting costs.
Tax and Fiscal Headwinds
Landlords have already seen waves of tax changes in recent years (e.g. restrictions on mortgage interest relief, capital gains, stamp duty surcharges, etc.). Potential new tax proposals loom:
- Speculation over increased Capital Gains Tax or higher tax burdens on second homes may further erode returns. benhams.com+1
- Landlords may also face higher costs via local levies or regulatory charges associated with EPC or energy legislation.
Rent Caps (or Limits on Rent Increases)
Although the Renters’ Rights Bill does not explicitly mandate unconditional rent caps, one of its objectives is to “dampen rent rises.” Wikipedia Coupled with political pressure to increase affordability for renters, there is a credible risk that further legislation may impose limits on how much a landlord can raise rents (especially in hot markets or in areas of constrained supply).
If rents cannot be freely increased to meet increased costs, landlords with little buffer to compensate rising costs could find themselves operating at a loss.
Where Is the Break-Even Yield?
To make this concrete: consider a London property with a gross yield of 4 %. Suppose your total expenses (finance costs, voids, maintenance, management, compliance overrun, insurance, etc.) consume 2 % to 2.5 %. That leaves a net margin of ~1.5–2 %. But if new regulatory or compliance costs (EPC upgrades, increased maintenance, local regulatory charges) erode that margin by another 1 %, you have virtually zero net return.
Thus, in many London areas, a gross yield below ~5 % may already leave too little margin to absorb shocks. In prime central areas, where gross yields may be 3 %–4 %, landlords are arguably already in the danger zone.
Put another way:
If your London property yields under ~4.5 % gross, you risk slipping into negative or zero net return once new compliance, tax and regulatory costs bite.
Given that many London landlords currently achieve yields in that lower bracket, there is a credible scenario in which operating the property (especially multiple properties) becomes a loss-making proposition over time.
The Logic of Exiting Now
Given all of the above, the argument for selling now — rather than hoping for a recovery or enduring regulatory risk — becomes compelling:
- Falling upside from capital growth: London property prices are no longer appreciating robustly, and in many submarkets they are stagnating or declining.
- Tight margins and rising costs: With thin net yields, even moderate additional burdens (EPCs, compliance, tax) could push a landlord into loss.
- Regulatory risk crystallising: Once the Renters’ Rights Bill becomes law (i.e. receives Royal Assent), its limitations on tenancies and the pressure for rent moderation may become binding.
- Flood of supply: Many landlords may choose the same route — putting their properties on the market just as demand weakens — causing downward pressure on prices further.
- Liquidity before panic: Selling before a regulatory trigger gives you more control. Waiting until after the law passes may mean many forced or distressed exits at lower prices.
Kirstie Allsopp’s warning that “the property market is dead” highlights how difficult it already is to sell a tenanted property, let alone a multi-property portfolio. Landlords who want to exit the PRS in London could find themselves stuck in a drawn-out process spread over several years if they try to liquidate their property portfolio in piecemeal chunks.
If you don’t want to suffer that drawn-out burden — especially while juggling maintenance, tenant relationships, legislation changes, finance risk and compliance headaches — now is the moment to take decisive action.
The Landlord Sales Agency
If you own freehold rental property (or a freehold block such as an HMO or a house split into flats that you want to sell as a whole) with weak yield, and you want a clean break rather than a protracted exit subject to legislative risk, contact Landlord Sales Agency now if you want to avoid the piecemeal trap, and reduce your exposure to the looming Renters’ Rights regime.
We have 30K+ buyers including cash-buyers and investors who have the financial backing to ride out any storm and want to buy multiple properties together.
Due to depreciating value; high and rising costs (ground rent, service charges); restrictive lease terms that limit renovations and threaten the ability to meet EPC regulations; the complication and expense of lease extensions; and potential mortgage issues for short-lease properties: Investor demand has shifted away from Leasehold Flats. Therefore, we are currently only taking on sales of Freehold property.
If you have freehold properties to sell, contact us to get them sold – FAST!