The latest rental indexes continue to show a trend evident for some time in 2025 – rental growth is slowing and is unlikely to reverse any time soon. Alongside this are imminent legislation changes in addition to increased tax burdens that will the impact investment decisions you make throughout your business.
So, with compressed yields what impact does this have for your buy-to-let portfolio and how do you ensure you invest best if considering expanding as a landlord?
A slowing market
First, you must consider the impact of this slowdown in rental growth. ONS figures for September marked the eighth consecutive month of slowing annual rental inflation, with UK monthly private rental growth up 5.7% in the 12 months to August 2025 compared to 5.9% in the 12 months to July 2025. Rightmove figures, meanwhile, showed that in July nearly a quarter (24%) of rental homes were being reduced in price during advertising.
This is because rental demand is also falling, with letting agents receiving 24% fewer enquires than a year ago – a figure that is at its lowest level for August since 2020, according to research from Zoopla. Improved mortgage availability is allowing more first-time buyers to purchase meaning that they are moving out of the rental market they once inhabited. This is also causing an increase in supply, with the number of homes available for rent up by almost a fifth compared to a year ago.
But yields seem to be holding up, according to Zoopla. Although growth has slowed, the limited supply and strong demand seen post-pandemic pushed rents 36% higher since 2020, while house prices grew around 20%. This has led to increased returns for landlords and average rental yields of around 6% across the UK.
Landlords still investing
Zoopla says that more landlords are choosing to invest, despite the challenges in the market, with the number of new buy-to-let mortgages for home purchases up 60% in the first quarter of 2025, although UK Finance figures say the number of buy-to-let loans advanced in the UK rose 39% in the period. Rightmove’s figures suggest a 28% increase in the number of new rental home purchases to July, encouraged also by lower interest rates throughout the year which increased mortgage affordability for landlord investors.
Rental inflation looks set to be on track for 3% over 2025 as a whole. The market may have slowed from its post-pandemic peaks, but it’s more about a return to a better balance between supply and demand than a sudden collapse in the market.
Yields remain healthy but not inflated. The limitations on rental growth mean that landlords should consider other factors – including the possibility of tenant voids, financing costs and capital growth – rather than simply how high rents may rise when planning strategies. Sensible portfolio expansion, based on growth regions and offering value-add services – such as energy upgrades or improved room configurations – will increasingly be of influence.
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.
