It’s fair to say that developments in recent years have made things more complicated for some landlords.
The restriction on mortgage interest tax relief (or Section 24 as it is often known) has raised many landlords’ tax bills.
And many local authorities have introduced selective licensing and additional HMO licensing regimes.
Furthermore, the new government is currently working on the Renters’ Rights Bill, which could become law in 2025. The bill will probably ban fixed-term tenancies, make it more difficult to evict tenants if you need to, limit rent rises and create more red tape.
Despite all the challenges in the rental market, there are several positives to take on board.
Demand
Demand for rental properties is outstripping supply. In most cases, there are many more tenants looking to rent than properties available. That’s a trend that is likely to continue over the next few years.
Rents
Rent levels are very strong. Several forecasts suggest that average rents will keep rising over 2025 and beyond.
Savills forecast that mainstream rents will rise 4% in 2025 and 17.6% in total over the next five years.*
Values
Property values remain firm. Many experts predict property prices will continue to rise in the next few years.
Again, Savills forecast that mainstream house prices will rise 4% in 2025. And by 2029, they will have increased by 23.4% – almost a quarter.
So, property should continue to be a good place to keep your money. (Don’t forget that capital appreciation, not just rental income, is one of the reasons for investing in property.)
Interest rates
Mortgage rates are trending downwards, and they will likely continue to fall next year. This will help to reduce your mortgage repayments even further if you have one.
One forecast, from Capital Economics, suggests that the Bank of England interest rate could fall to 3.5% in early 2026.*
Taxation
Capital Gains Tax (or CGT) on residential property investments wasn’t hiked in the last Budget, as it was for other assets. That’s put property on a more level playing field with other types of investments.
If you had been thinking of selling for tax reasons, then the risk of having to pay more CGT has receded, at least for now.
Renters’ Rights – pros and cons
It is true to say that the Renters’ Rights Bill is likely to prove an issue for landlords in 2025. But there have been many ‘scare stories’ about the changes in the press. While the new rules that landlords will have to work with are not entirely clear yet, it can’t be denied that they will create more work for landlords.
It’s worth remembering that once it comes in, you won’t have to face the Renters’ Rights Bill alone. There are plenty of experts out there, from letting agents and other professionals, to guide you through it.
Some would argue that the Renters’ Rights Bill could actually benefit good landlords. It may encourage some landlords to sell up. It should help to push bad landlords out. Those landlords who remain in the market will benefit from strong demand for their property.
The optimists among us might say there could be some good reasons for buying more rental property in 2025, not selling it.
Action plan for landlords
Whether to sell or keep your buy-to-let is a decision only you can make. At the end of the day, you should do what is best for you.
We’d strongly recommend that you ensure you are fully informed before you decide.
Take advice from your accountant and a financial adviser. They can guide you on the implications of remaining in the market or exiting it. They can also discuss how much tax you might have to pay if you sell your property.
Also consult a letting agent. A good letting agent can advise you on current trends in your local rental market. They may be able to suggest ways you can maximise returns from your property.
Do you know a landlord or property investor who would find this article useful? Please feel free to share it with them.
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