Predicting the future of the UK buy-to-let market is no easy task since it’s about to go through the biggest regulatory change in over thirty years when the Renters’ Rights Bill comes into force. Landlords are already worried about the impact this will have on their buy-to-let plans and operations in 2025 – it’s no wonder that they look to the future with a degree of nervousness.
Are their worries justified?
In short, yes. The changes are sweeping and will take time and effort to implement which means landlords must be careful not to get distracted from day-to-day business. Under the Renters’ Rights Bill, tenancy agreements will be rewritten and possession grounds redefined. Tenancies will move from shorthold assured tenancies to periodic tenancies and Section 21 ‘no fault’ evictions will be abolished. Both landlords and tenants will need to understand the implications of these changes and how they will be impacted.
New responsibilities
The additional rights to stay in a property give tenants greater security and aim to encourage them to put down roots, but this means less flexibility for landlords who might be in the market for more short-term gains and who preferred the surety of knowing when a tenancy agreement would end.
The government is also revising the Minimum Energy Efficiency Standards (MEES) for rental properties and amending the structure of Energy Performance Certificates. This, too, brings challenges for landlords since it will inevitably involve additional responsibilities and investment.
Increased costs
Increased costs are challenging for landlords’ cashflows. Like buyers, landlords coming off longer-term, low fixed rate buy-to-let deals will have seen their mortgage costs rise as they fix again, even though mortgage rates have fallen from their 2023 peaks. Stamp duty increases are also an additional cost for landlords who want to expand their portfolios.
Everyday costs have also risen, impacting everything from energy (with the latest energy price cap rise in April) to property maintenance as businesses absorb increased National Insurance costs.
Previously landlords might have raised rents to cover such cost increases. The imbalance between supply and demand of rental properties in the private rented market has meant they have been able to do this. However, changes in the Renters’ Rights Bill will limit their ability to do this in the future.
When advertising for new tenants, landlords will no longer be able to encourage or accept higher bids. Instead, the rent they charge will need to be what was advertised and must be in line with the rest of the market. Meanwhile, rent increases will be limited to once a year, with notice.
Landlords will also no longer be able to demand multiple months’ rent in advance to secure a property. Advances will be limited to one month’s advance rent and a security deposit of up to five or six weeks’ rent.
Is there hope?
There’s no doubt that landlords are facing challenges as the market changes, but the fundamentals of the buy-to-let market do remain sound. UK rents are continuing their long pattern of continued growth, up 8.1% to £1,326 in the twelve months to February 2025, according to the ONS.
Rental demand isn’t letting up any time soon either, with ten applicants per rental property according to Rightmove. Supply is being strained further by those landlords for whom the changes they face are too great for them to absorb and are leaving the market. Meanwhile, some would-be buyers are still waiting to buy.
In conclusion
Landlords do face change but fundamentally if you already run your portfolio well and are already investing in energy efficiency, you should weather the storm. We can’t take away the worry, but we can try our very best to help you manage it.
For more information on how Kings Group can assist you on your letting journey, please contact one of our branches in Essex, London or Hertfordshire today. We also offer a free and instant online valuation to give you an idea of how much your home could be worth on the current market.
