After a year dominated by the impact of the general election and uncertainty around future legislation, what can buy-to-let landlords expect from 2025?
Read on for our five rental market predictions, covering the following topics:
- The Renters’ Rights Bill
- Energy efficiency standards
- Stamp duty changes
- Average property prices
- Rental growth and demand
1. Renters’ Rights Bill to become law
The Renters’ Rights Bill proposes the most significant changes to tenancy law in a generation, including scrapping Section 21 evictions and ending fixed-term tenancies.
After making steady progress in autumn 2024, the bill enters 2025 at the report stage in the House of Commons. It still needs to pass through a third reading and the House of Lords before it can receive Royal Assent and become law.
So while predictions this could happen as early as spring 2025 now seem unlikely, there’s a strong chance the Renters’ Rights Bill will become the Renters’ Rights Act before the year is out.
This means preparation should be top of mind for landlords, from brushing up on the proposed new eviction process to removing rent review clauses from tenancy agreements.
Despite the pressing nature of the new laws, the government’s English Private Landlord Survey 2024 revealed that a quarter (25 per cent) of landlords were not aware of the Renters’ Rights Bill. On top of that, almost two thirds (63 per cent) didn’t know that the bill proposes to end fixed-term tenancies.
2. Details on changes to energy efficiency rules
During 2025, it’s likely the Labour government will release more details about its plans to improve energy efficiency in rental properties.
The current proposed plans are to increase the minimum Energy Performance Certificate (EPC) rating from E to C by 2030. However, no other details have been published.
It’s likely that a consultation could come first, with key information such as exemptions, a cost cap, and enforcement timelines to be worked out.
It’s clear that whatever shape the new rules take, they could be costly for many landlords. Simply Business research found that half of landlords will need to make improvements to their properties to meet an EPC standard of C by 2030.
Of those, over a third (34 per cent) estimate they’ll need to spend between £1,000 and £10,000, while 11% think they’ll need to spend more than £10,000.
3. Impact of stamp duty changes to become clear
As part of the Autumn Budget 2024, the government increased the stamp duty surcharge for landlords from three per cent to five per cent.
And from April 2025, the threshold at which property buyers have to pay stamp duty will be reduced from £250,000 to £125,000.
This means landlords buying cheaper properties will be faced with higher stamp duty bills.
As a result, it’s expected that there’ll be a rush of transactions before the threshold changes in April. After that, it’s expected that activity could drop off. However, stamp duty increases could be offset by lower mortgage interest rates.
4. Property values to keep on rising
Average property prices in the UK remain strong, recording healthy growth in late 2024. This followed a period of slower growth and small drops between 2022 and early 2024.
Rightmove predicts that average asking prices will increase by four per cent by the end of 2025, culminating in over one million transactions.
The property portal expects this activity to be driven by lower average mortgage rates, while the early part of the year could be particularly busy as buyers try to beat the stamp duty hike.
Tricky conditions could mean the number of landlords buying new properties in 2025 is low. Our 2024 Landlord Report found that just 11 per cent of landlords are planning to buy a property before August 2025.
Although margins have been squeezed by rising costs, the long-term stability of average house prices means many landlords can still expect a healthy yield in 2025. This is backed up by two in five landlords saying they still believe buy-to-let to be a worthwhile investment.
5. Average rents to remain high due to strong demand
Demand for rental homes has soared since 2020, consistently pushing up average asking rents. This trend looks set to continue in 2025, albeit at a slightly slower pace.
According to Zoopla, the imbalance between demand and supply of rental properties has narrowed. However, at the end of 2024 the number of available rentals was still 18 per cent lower than before the Covid-19 pandemic.
In areas where growth has been highest, such as the UK’s major cities, affordability has become an issue for prospective tenants. As a result, rental growth is likely to be more moderate in 2025.
Zoopla found that between 2021 and 2024 average UK rents increased by 27 per cent, with wages only increasing by 19 per cent during the same period. However, by October 2024 earnings were rising faster than rents for the first time since September 2021.
Landlords advertising properties to rent in the coming months will need to find a balance between growth that reflects their rising costs and what tenants can afford.
Source: Simply Business
