If you are wondering whether it’s still possible to make money through buy-to-let in 2025, we aren’t surprised. It’s a valid question when faced with news of increasing costs and additional legislation for landlords.
Undoubtedly there are challenges ahead so is investing in buy-to-let, whether for the first time or to expand your portfolio, still a smart choice?
Market trends
When you look at rental values, the market continues to look attractive. Rents are increasing, in part due to a mismatch between supply and demand. The intense demand is caused by two factors. The increase in potential first-time buyers renting as they wait for mortgage rates to fall to make buying more affordable and the exodus of landlords leaving the market because of the higher costs they face.
Average UK private rents rose by 8.7% in the 12 months to January 2025, according to the latest figures from the ONS. In England they rose 8.8%, hitting an average rent of £1,375. Sustained rental growth has been a market feature for some time now.
Challenges
But landlord costs have also risen as interest rates soared. Maintenance costs and mortgage fees have increased and hit profit margins. Meanwhile, the immediate jump in stamp duty for landlords in the October budget also increased costs for those wanting to expand portfolios. Other regulatory changes, such as no longer being able to deduct mortgage interest as an expense, have also hit landlord pockets.
Landlords face further costs as they adapt to changing legislation. The Renters’ Rights Bill will introduce several new responsibilities and requirements for landlords, including major changes to tenancy structures.
The bill is designed to improve standards in the sector and stamp out rogue landlords rather than penalise good ones. For those landlords who already operate their properties to high standards, the changes aren’t so significant, although the change to periodic tenancies will give them less clarity about when a tenant may leave.
Changes to energy efficiency requirements are also a concern. The government’s revision of the Minimum Energy Efficiency Standards and a revamp of the structure and requirements of Energy Performance Certificates are important moves in the government’s race to net zero. However, the changes are likely to be costly with the role of government funding still not clear.
Opportunities
But where there is challenge there is opportunity. The investment in energy efficiency is a necessary cost for the future but it is forcing some landlords looking for shorter-term gains out of the market. Yet as rental supply decreases, demand increases further which means a shortage of tenants and rental voids are less likely.
And property remains a significant long-term investment opportunity. Average UK house prices increased by 4.6% to £268,000, in the 12 months to December 2024, according to the ONS. That’s up more than £100,000 on the February 2005 £150,488 price tag. Strategic purchasing in particular will still drive healthy capital growth. Good quality rental properties are still sought after and although landlords will need to adapt, it’s still very much a viable market. It isn’t easy but buy-to-let is here to stay and we’re here to help you manage the process.
We Can Help
At Progressive Lets we are experts in the rental market in the Peterborough area and help landlords find and manage properties within a 50-mile radius. Get in touch to find out more.
