Houses of multiple occupations (HMOs) continue to outperform the wider private rented sector market, achieving materially higher average yields of 7.3%, Pegasus Insight reveals.

The latest data shows average landlord yields dipped to 6.4% in the last quarter of 2025, easing back from the average of 6.6% recorded in Q3.

It also found that 85% of landlords continue to report their lettings activity as profitable, although down 4% on the preceding quarter.

By contrast, landlords with standard property portfolios are more exposed as costs remain elevated.

Pegasus Insight managing director and founder Mark Long says: “The key takeaway from Q4 is not that profitability has weakened significantly, but that it is becoming more uneven. Overall returns remain close to recent highs, but the margin for error is narrowing for a growing proportion of landlords.”

“We’re seeing a clearer separation between business models. Higher-yielding, more intensively managed portfolios, particularly HMOs, continue to provide a degree of insulation, while more traditional portfolios have less flexibility as costs and complexity remain challenging.”

“The risk to buy-to-let landlords is not a sudden deterioration in performance, but a more gradual erosion of resilience. In an environment where yields are no longer rising, the ability to absorb further regulatory, operational or economic pressures will increasingly depend on the strength of landlords’ financial structures and the scale and mix of their property portfolios.”