Property expert and Director of the Belvoir Nottingham Group, Lloyd Rumbold, shares predictions for the lettings market in 2025. From policy changes, to the impact of technology and the change in tenant demands.
Can you share your overall predictions for the lettings market in 2025? What do you think will be the biggest changes we’ll see?
From a residential perspective, the market in Nottingham will continue to grow as demand continues to far exceed supply. Gedling Borough Council’s plan to expand their selective licensing remit into the Netherfield area in January 2025 will likely push rental values higher in this region.
Landlords will seek to recover increased costs of accommodation provision while meeting the rising demand in the private sector. Properties located just outside this newly licensed area will also benefit from the rental increases in neighbouring areas.
The ongoing cost of living crisis, while a frequently discussed topic in the media, is beginning to have a deeper impact on residents in the city. Tenant referencing shows a narrowing affordability gap between disposable income and the cost of living, with many tenants increasingly reliant on credit to maintain their lifestyles. This is placing growing pressure on the sector to meet rising costs and rental obligations that are outpacing income streams. As a result, rent guarantee products are becoming an ever-more important recommendation for landlords.
The Renters’ Rights Bill is undoubtedly on the way, but for landlords who are already compliant, the impact will likely be less severe than some may fear. However, landlords who have historically self-managed their properties may find themselves struggling with new hurdles and hidden loopholes introduced by the government to increase tenant security. As such, managing properties without professional support may prove more costly than opting for a fully managed service.
From a student housing perspective, the rapid construction of studio apartments across the city—an issue I raised last year—has been further impacted by the government’s 75% reduction in overseas student visa issuances in November 2023. This sector is likely to face considerable challenges moving forward. Universities have also been shedding staff at an alarming rate, with many moving to offer more remote study options, which suggests a short-term approach to a long-term problem: dwindling investment in the city and its educational facilities.
How do you see the government’s ongoing policy changes impacting landlords over the next few years?
For residential landlords without mortgage debt, the next five years could yield the best returns on record. This is good news for the industry, the government, and tenants, as it helps address the growing supply and demand imbalance. However, the government’s optimism about solving the housing crisis with this approach seems somewhat naive. Many landlords who own unencumbered properties have spent their lives reaching this position and are likely closer to exiting the market than people realise.
The more pressing concern lies with landlords relying on private investment to fund property purchases. For those needing finance, the increased costs of second-home deposits, stricter energy efficiency requirements, and rising borrowing costs are all limiting the return on investment (ROI). The government seems out of touch with the needs of the sector and, more importantly, the 5.6 million tenants who depend on private rental accommodation.
We’ve seen a lot of focus on energy efficiency and sustainability in the property sector recently. How do you see these trends affecting both landlords and tenants moving forward?
The Minimum Energy Efficiency Standards (MEES) and the upcoming EPC amendments have been a long time coming. Given that much of the UK’s rental stock was built before 1900, meeting current regulations can be challenging, and in some cases, may be impossible. However, many landlords will be affected, and implementing necessary changes will require a holistic approach in terms of both finance and timeframes.
The government, as the body responsible for setting energy efficiency standards, must take the lead by issuing a clear strategy for manufacturers, installers, and landlords alike. Without this, it will be difficult for the sector to meet the targets they’ve set, as these remain largely undefined.
In your experience, how are tenant demands changing, and what should landlords be mindful of when it comes to what tenants are looking for in rental properties?
Historically, rental properties were typically the choice of those seeking temporary accommodation or those unable to afford to buy. Today, however, renting is often a choice rather than a necessity. Renters value the flexibility that renting offers, especially in a competitive job market where employees are more likely to change jobs than remain loyal to one company or industry.
Tenants now expect higher standards in terms of fit and finish, reflecting their ability to upgrade as their income increases. As a result, the once-typical magnolia walls, basic kitchens, and bathrooms are now largely overlooked. Renters are often looking for aspirational homes, prioritising quality and modern amenities over basic, lower-cost options.
The cost of living and inflation have been significant challenges for many property owners. What strategies would you recommend landlords adopt to stay profitable in a potentially tougher financial climate?
Landlords should ensure they are maximising the returns from their current rental portfolio by regularly reviewing and adjusting rents to match market values. Many landlords fail to make regular rent increases, which can lead to sudden large hikes that cause tenants to leave unexpectedly. By implementing small, incremental increases on an annual basis, landlords can maintain consistent yields while giving tenants time to adjust.
Rent guarantee products are becoming more crucial as tenants’ financial situations become more strained. Reviewing mortgage arrangements regularly is also important. Many landlords re-mortgage and then fail to revisit their terms, fearing early repayment charges. However, it’s worth considering that porting products can offer benefits, such as freeing up equity for reinvestment.
Are you seeing any signs of changing property investment strategies among landlords?
There is an ongoing trend of landlords purchasing properties through limited companies, although recent changes in government policy have reduced some of the tax advantages of this strategy. We are also seeing a slowdown in the conversion of properties to serviced accommodation in Nottingham.
While serviced accommodation can offer high nightly rates, annual returns are more volatile due to seasonal voids, cleaning, and turnover costs. With rental values rising and average tenancy lengths increasing to around 3.5 years, residential lettings are often proving more profitable on a profit-and-loss basis than serviced accommodation over the long term.
How will technology continue to shape the lettings and sales market in 2025, and how can landlords take advantage of new tools or platforms to enhance their property management?
AI is becoming a key trend in property technology. From virtual tours with integrated floor plans to tools that blur personal information in photos, new tech is making property management more efficient. AI-driven tools can also help manage property inspections, schedule routes for efficiency, and diagnose common appliance faults. These innovations improve both tenant experience and operational efficiency for landlords.
With interest rates still fluctuating, how are financing conditions changing for landlords, and what advice would you offer to those considering expansion or refinancing in the coming years?
Financing Buy-to-Let (BTL) properties has become more difficult due to higher borrowing costs. However, while interest rates are higher than in the past, they are still considerably lower than they were when most properties were purchased. As a result, we may be entering a period of relative stability in interest rates, with minimal fluctuations expected.
If a potential property purchase is financially viable at current rates, it may become even more profitable if rates drop in the future. Conversely, if rates rise, rental values are likely to increase in line with these changes, helping landlords to maintain profitability. It’s crucial to work closely with a mortgage advisor, as new products continue to emerge, offering opportunities to port between deals and maximise yields.
Finally, if you could give one piece of advice to landlords preparing for the property market in 2025, what would it be?
Stay informed beyond the headlines. If you’re fully managed, rest assured that we have everything under control.
