Cornerstone Asset Advisors founder Emile Salame benefits from extensive experience of the London real estate industry. This article will look at the buy-to-let market, a cornerstone of the UK real estate sector that is being reshaped by policy changes and recent trends.
For British landlords, 2025 is set to be a year of both challenges and opportunities, with evolving regulatory frameworks, new tax measures and shifting economic conditions all demanding careful consideration. While there remains cause for optimism, adapting to these shifts will be crucial for long-term success.
Figures from UK Finance offer a mixed but insightful snapshot of the UK’s buy-to-let market, reporting a 6.5% year-on-year rise in new loans in the third quarter of 2024, with average rental yields rising to 6.93%. This trend indicates that landlords are actively seeking out new investment opportunities, particularly in the North, where lower purchase prices and higher yields make buy-to-let a more viable investment vehicle.
Following a challenging year in 2024, largely stemming from the 2022 mini budget, UK property investors and landlords have had to contend with tightened lending criteria, nervous high street banks and rising costs. This has culminated in bleak sentiment in the buy-to-let market, which has simultaneously been struggling with a lack of supply for both buyers and tenants. Nevertheless, experts point towards a more positive future should the interest rates be gradually reduced throughout the coming months. In the event, this was achieved even sooner than that, with the base rate cut from 4.25% to 4% on 7th August 2025. Industry experts point out that such cuts could go a long way towards restoring confidence in the buy-to-let market.
Having slowed somewhat, rents are predicted to rise in 2025. Although costs may eat into this, yields are tipped to be surprisingly high by the end of the year. Given the unwavering demand for rental properties across the country, rental yields are predicted to remain stable through 2025. Indeed, imbalances between supply and demand are being seen not only in the residential market but also in the commercial sector too. According to the CBRE, offices, data centres, industrial and logistics properties, and retail assets will all bounce back in 2025.
Published in June 2025, HM Revenue and Customs’ landlord survey revealed that 20% of landlords planned to sell up in the next year and 33% within the next five. In addition, just 4% of landlords said they planned to purchase more properties in the next year and 8% in the next five years. Many cited the driving factor behind their change in strategy as changes in tax rules and property regulations. Predicted to be passed within months, the Renters’ Rights Bill limits landlords’ rights to increase rents, as well as eliminating fixed-term contracts and ‘no fault’ evictions. In addition, new energy-efficiency standards are on the way, with new tenancies starting from 2028 likely to have to meet higher energy performance certificate ratings, with all rentals expected to comply by 2030.
Although the UK’s buy-to-let investors face many hurdles, chief among them cost challenges and legislative and sentiment problems, many reasons remain to embrace an optimistic outlook. Although some landlords will inevitably be forced out of the market, this could create some attractive buying opportunities for others. There has also been a notable rise in commercial-to-residential property conversions in recent years, paving the way for cheaper/alternative entry points for property investors. As ever, many pros and cons of buy-to-let remain in 2025, and landlords need to keep abreast of the latest legislative shifts, market movements and industry trends.
