It’s been a testing time for the UK economy over the past few years – including a change of government this year and a ‘shock’ Autumn Budget with hikes in stamp duty for second homes; increases to National Insurance on employer contributions; and capital gains tax and inheritance tax increases. Plus, there’s an ongoing property and cost-of-living crisis.
The Bank Rate at 4.75% is hovering around what is probably the new norm, while attempts by the Bank of England to lower it are hampered by a stubbornly high inflation rate (2.6% at the time of writing in January 2025). This rate has been rising again since the budget. Meanwhile, the property market continues to defy many doom-laden forecasts.
The Bank of England says that “If those [inflationary] pressures continue to ease, we should be able to keep reducing interest rates gradually. But it is vital that we make sure inflation stays low, so we need to be careful not to cut them too quickly or by too much.”
ONS figures published in December 2024 show the average house price for the UK increased by 3.4%, to £292,000, in the 12 months to October 2024 (provisional estimate); this annual growth rate is up from 2.8% in the 12 months to September 2024.
Meanwhile, average UK private rents increased by 9.1% in the 12 months to November 2024 (provisional estimate); up from 8.7% in the 12 months to October 2024, easily outstripping inflation. Average rents increased to £1,362 (9.3%) in England, £772 (eight per cent) in Wales, and £980 (6.5%) in Scotland, in the 12 months to November 2024. In Northern Ireland, average rents increased by nine per cent in the 12 months to September 2024.
For more on what’s happened this year, see our annual month by month round up of what 2024 meant for landlords.
A continuing shortage of rental accommodation will underpin market rents in 2025, with the UK's rental prices expected to increase again, but at a slower rate than in recent years. Savills predicts a four per cent increase in rental growth across the UK in 2025, Hamptons 4.5%, followed by four per cent in 2026 and 2027.
There could be affordability issues, with pressure on tenants resulting from past steep rent rises, and there’s the uncertainty of how the budget measures, the Renters' Rights Bill and other regulatory changes will play out.
In the case of UK house prices, having recovered from a "mini" property recession and technical economic recessions in early 2024, there are now multiple factors affecting forecasts for 2025, in particular the question of economic growth.
Rightmove predicts a four per cent increase in average asking prices by the end of 2025, which is broadly in-line with the long-term average. Meanwhile, Savills sees a 3.5% increase in 2025, with further rises in 2026, 2027, and 2028. Knight Frank is more pessimistic, anticipating a 2.5% increase for 2025.
Again, affordability will likely have the biggest influence on house prices in 2025 and beyond. Buyers in London and the south east will still need to borrow more relative to their income and accumulate a bigger deposit to buy.
A lot will depend on the speed of any UK economic recovery, and there is a big question mark over whether the effects of Rachel Reeves’ budget support or hinder growth. Our article explores the key changes for landlords in the budget.
In the case of residential property, Savills’ latest 2025 forecast says the housing market is in the early stages of recovery, but a variety of new policies mean that sustaining it in 2025 remains uncertain.
Savills identifies family homes in “educational super towns” as potential hot spots - given an “expected drive to find good, affordable education at a time when VAT on school fees is likely to shape where more affluent families put down their roots – as key locations of strong demand when near outstanding state schools.”
Savills’ research shows that residential buy to let in the north west of England remains its top performer for annualised returns at 10.8% (total return), as it did in its 2024 forecasts. Savills finds positivity in the sector across the UK, being driven by the restrained supply of prime space in most cities.
So, investors who research an area properly should be able to find good deals that will then grow in value, while producing good yields over the medium to long term.
All this means that if you are able to buy the right type of property, one that’s in demand, in the right location and at a good price, you should be able to secure better than average rental returns. Read our ultimate guide to buy to let property investment for more guidance.
Now, with a new government and the Renters’ Rights Bill expected to become law in spring 2025, and with the Government aiming to have the new rules in place by summer 2025, landlords and agents will need to adapt. The Bill has passed its first and second readings in the House of Commons, and the committee stage was completed by 5 November 2024. The Bill will return to the House of Commons on 14 January for the report stage and third reading, after which it will move to the House of Lords.
The new rules will bring the biggest change to renting laws in England since the introduction of the shorthold tenancy with the passing of the Housing Act in 1988. Landlords and agents are beginning to come to terms with the new approach, though there is some apprehension about the state of the county courts system and how the courts can deal with a possible increased workload when they are already way behind schedule with cases.
“It’s abundantly clear that county courts are facing a severe bailiff employment crisis, with only around 300 county court bailiffs available across England and Wales. This shortage is eroding landlords’ confidence in the legal system’s ability to help them regain possession.”
- Paul Shamplina, founder of Landlord Action
The biggest issue is the abolishing of Section 21 because landlords are simply not confident that the grounds for possession and the much more involved process under Section 8 will give them enough protection. With many grounds remaining discretionary, the potential cost of evicting a tenant through the courts, and length of time that could take, are major concerns.
Stakeholders including agents’ body Propertymark have expressed concerns about the removal of fixed-term tenancies and how this could negatively affect landlords and agents – especially those in the student rental market, which relies on fixed-term agreements to keep the availability of properties in line with the academic year, though there is now a concession in the Bill for student let notice periods.
Housing Secretary Angela Rayner and Minister Matthew Pennycook, have said that notwithstanding problems with the courts, they will be removing Section 21.
To find out what’s currently included in the Bill and for all the latest developments, visit our dedicated Renters’ Rights Bill hub.
Potential law changes for landlords and agents to be aware of in 2025 mainly revolve around those rule changes to be introduced in the Renters’ Rights Bill, including:
Chancellor Rachel Reeves delivered her first budget in October 2024, announcing a range of new measures designed to raise extra taxes for Labour’s planned public services and infrastructure spending - £40 billion in total, one of the biggest UK government tax increases in history.
Capital gains tax (CGT) rates for selling rental properties were held at 18% and 24% but stamp duty (SDLT) rates for buying additional properties were increased from a three per cent to a five per cent premium.
Income tax thresholds remain frozen until 2028. The nil rate band (NRB) and residential nil rate band (RNRB) for inheritance tax remain frozen until 2030.
Perhaps the biggest surprises in the budget came with the following changes:
Some of these changes will considerably affect landlords with employees and those with large capital gains in property, those who run farms and businesses, and particularly those with large estates.
It is recommended you consult a tax expert as early as possible to get some reliable tax planning advice.
For an overview on taxation for UK landlords read our complete guide to UK landlord tax.
For the past few years, the Government has been stating its intention to raise the minimum EPC rating to legally let a home from ‘E’ to ‘C’. That was originally due to come into effect for new tenancies from 2025 and all tenancies from 2028, which would have made 2024 a ‘crunch’ year for landlords to make any necessary improvements to their properties.
However, in September 2023, Prime Minister Rishi Sunak announced that these plans were to be scrapped, with landlords and homeowners instead simply encouraged to upgrade energy efficiency where possible.
Meanwhile, in Scotland, the 2025 deadline for rented homes to achieve a minimum ‘C’ rating for new tenancies has just been dropped. A new draft bill is now only proposing that all tenancies meet the ‘C’ rating by the end of 2028.
The latest information gives the minimum Energy Performance Certificate (EPC) rating for rented properties to rise to C by 2028:
2024: The minimum EPC rating for renting out a property is E
2025: The minimum EPC rating for new tenancies is C
2028: The minimum EPC rating for all existing rentals is C
These changes are intended to make rental homes more energy efficient, reduce carbon waste, and help tackle fuel poverty.
A property has an EPC rating of C when it scores between 69 and 80 points on the Standard Assessment Procedure (SAP). This is a government-stipulated method used by local energy assessors to evaluate a property's energy efficiency.
See our ‘Ultimate guide to having an eco friendly property’ for information and advice.
For more property market data , read our ‘Economic and property market update for 2024’
The biggest determiner of mortgage rates is the Bank of England base interest rate, which was increased over the past few years in an effort to combat double-digit inflation. This has now come down again to its present 4.75% (at the time of writing in January 2025). It may come down more if inflation (2.6%) can be got under control and nearer to the Bank’s target of two per cent.
Experts in finance are expecting lower mortgage rates in 2025 for residential housing and buy to let. Rates are expected to decline, with the Bank of England potentially cutting rates to between 3.75% and 3.5%.
As of December 2024, average buy to let mortgage rates for a two year fixed rate mortgage (75% LTV) were at a 5.44% average rate across all lenders, 4.92% average rate across the big six lenders.
UK Finance predicts a seven per cent drop in mortgage lending for buy to let purchases in 2025 compared with last year, with the slower rental growth than in 2024. While demand for rental homes is expected to remain high, rental growth is likely to be more moderate for 2025. However, average rents are likely to remain high due to strong demand.
Sources:
Sources: Savills, NIESR, Zoopla, OBR, PwC, JLL
Read our ultimate landlord guide to buy to let mortgages for more advice.
Here are some rental rule changes expected to come in Scotland in 2025:
The rent adjudication mechanism, which caps rent increases at 12% of the current rent, will expire in March 2025.
Rent control areas, a framework for rent control, will replace rent pressure zones.
A rent cap will be introduced in areas where rent control applies. The cap will limit rent increases to the Consumer Price Index (CPI) plus one per cent, up to a maximum of six per cent. The cap will apply to rent increases during and between tenancies.
As of 31 March 2025, landlords will be prevented from renting out properties with an Energy Efficiency rating below a "D" unless they qualify for an exemption.
There are several changes to rental rules coming to Wales in 2025.
Social landlords will be able to set their own rent increases for 2025–2026, subject to the Consumer Price Index (CPI) figure falling between 0% and three per cent. This extension of the Welsh Government's rent and service charge standard will provide certainty for tenants and social landlords.
The Renters' Rights Bill will make it illegal for landlords and agents to discriminate against prospective tenants with children or those receiving benefits. Landlords will need to consider applicants' individual circumstances to determine if a property is suitable.
Under the Bill there will be a right to request consent to keep a pet in their property, and landlords will have 28 days to respond. Tenants will be able to appeal to the new Ombudsman or go to court if they are denied consent.
There will be guidance published on how to demonstrate that a private rented property is habitable.
There will be guidance on taking rent guarantors.
Landlords and agents will be required to provide data to Rent Smart Wales, the country's landlord registration scheme.
Welsh ministers will have a duty to produce a housing strategy that public bodies must consider.
Property investment shows, which offer free entry and free seminars, give landlords the opportunity to meet and hear from key industry experts and companies, and are a great way of staying up to date with the latest developments in lettings.
Total Landlord’s Chief Commercial Officer and founder of our eviction and housing law partner, Landlord Action, Paul Shamplina, is a regular speaker and expert panel member at these events, and has won Best Seminar Speaker at the Landlord Investment Show Awards three times.
Here are some of the key show dates for your diary in 2025:
National Landlord Investment Show – 2025
For full details, see the National Landlord Investment Show website.
Property Investor Show
Register to attend at the show website.
