Professional investors have turned their attention to build-to-rent developments as higher costs and greater tenant rights prompt them to think more about tenant risk, affordability and long-term portfolio planning, according to new research.

Handelsbanken’s Property Investor Report polled 200 UK real estate investors, property management professionals and landlords, (the majority of whom owned or managed between five and 15 properties) and found that almost two thirds (63%) say higher overall costs have caused them to raise rents.

However, more than two fifths (41%) also say costs have prompted them to switch their tenant profile, such as by prioritising ‘lower risk’ tenants. In response to the Renters’ Rights Act, 59% are tightening tenant selection criteria, while 44% are considering raising rents earlier than planned. However, most (89%) are investing in energy efficiency measures, particularly EV charging, smart meters, and solar panels.

Flats

Just under two thirds (63%) plan to invest in houses and 59% plan to buy flats. Student housing and HMOs are also viewed positively, with 44% looking to increase exposure to student housing and almost half (48%) indicating a desire to raise their exposure to HMOs. Nearly three quarters (71%) plan to invest in build-to-rent developments – either through a BTR fund, buying units within a development, or directly financing a project.

It supports recent findings by Savills that the UK BTR sector attracted £2.2 billion of investment in Q2 2026, marking the strongest second quarter on record.

Handelsbanken UK chief economist, James Sproule, believes the PRS is not simply becoming more expensive for landlords to operate; it’s becoming more selective. “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,” he says.

Evidence

The report also found evidence that rising costs are affecting wider portfolio decisions. One in five (20%) professional property investors have sold properties due to higher costs, while 19% 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.

Despite these pressures, the findings don’t point to a wholesale retreat from the market, as 84% plan to increase their portfolio holdings over the next 12 months, compared with 54% in the bank's 2025 survey. Almost all respondents (93%) expect their portfolio value to rise over the same period, with 38% expecting it to increase “a lot”.

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