The value of homes in the private rented sector fell by £48bn in 2025, the largest annual contraction this century, as research indicates smaller landlords are selling their rental properties.
Savills’ analysis found the sector has contracted by £79bn over the past three years, despite continued growth across the wider housing market.
It estimates the total value of the national housing stock rose by 3.8% or £336bn over the same period.
Private rented housing was the only tenure to decline during those three years, with the sector’s value falling by 5.1%.
Portfolio landlords are buying
Savills' head of residential research, Lucian Cook, said: "Over the past 25 years, we've grown accustomed to a story of the private rented sector expanding at the expense of people's ability to get onto the housing ladder.
"But while deep-seated housing challenges remain, lighter regulation in the mortgage market and tighter oversight of the private rented sector are gradually beginning to shift that narrative."
He added: "Changes in tenancy legislation, higher operating costs and increased mortgage rates have prompted many private landlords to reassess their portfolios.
"Larger landlords, better equipped to absorb added costs and requirements, have taken on some of this stock, contributing to a more professionalised PRS.
"But others have been sold to owner-occupiers, reducing the sector's overall size."
First-time buyers grow
Savills says the value of owner-occupied housing rose by £185bn in 2025, with gains recorded among both mortgaged households and those that own their homes outright.
The firm links part of that growth to first-time buyer activity.
It also notes that the rise in privately owned housing values since 2022 has been supported by higher levels of mortgage borrowing.
Outstanding mortgage debt held by owner-occupiers has increased by 4.7% over the past three years.
PRS stock to buy
Mr Cook explains: "With more former PRS stock available to buy, first-time buyer activity has been relatively strong in the context of post credit crunch levels.
"This has been supported by the less stringent application of mortgage regulations, falling mortgage rates and rising wages."
He adds: "But there are still significant barriers to owning a home, and part of the growth in mortgaged home ownership is down to people taking longer to pay off their mortgage debt.
"The reduction in homes available to rent will also continue to push up rents, posing challenges to those who are struggling to save for a deposit."
Portfolio landlords are buying
The managing director of Accommodation for Students, Simon Thompson, said: "The figures indicate what many landlords have believed for some time and that is the private rented sector is shrinking as some landlords sell properties, often to owner occupiers.
"It is interesting that portfolio landlords appear to be buying some of those properties."
He added: "While overall housing values continue to rise, for landlords who remain in the market, a smaller supply of rented homes could support higher rents because demand remains strong.
"The PRS is seeing major structural change which could see larger or better capitalised landlords being increasingly able to absorb the stock being sold by smaller landlords.
"However, higher costs, mortgage rates and legislative changes will continue to influence investment decisions and portfolio strategy."
