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Change is the only constant in the private rented sector, but landlords, lenders and brokers are masters at adapting to whatever comes our way.
We recently kicked off our 2025 programme of Get more with Aldermore webinar sessions, focusing on buy to let and the private rented sector.
We were joined by Aneisha Beveridge, head of research at Hamptons, who shared her insights into the market, looking at where we are today, how we got here and key themes that will impact landlords in the future.
Her data-rich presentation confirmed trends, busted some myths and gave us plenty to consider on the outlook for the sector.
Below we run through some of the key takeaways from the session:
The last 10 years have been a rollercoaster ride for the buy to let sector, from tighter regulation and lending rules to higher taxes, alongside wider economic uncertainty. The days of ‘easy money’ renting out property are over, as the market has shifted from so-called ‘accidental’ and ‘amateur’ landlords to increasing professionalisation of the sector.
Despite these obvious challenges, the data gives us cause for optimism, as high demand and robust rental growth help to offset some of the increased costs for landlords.
Since the introduction of buy to let mortgages in 1996, the number of privately rented homes in England has doubled to 4.65 million, around 19% of households. However, this growth slowed and reversed from 2016, following the introduction of the second home stamp duty surcharge and removal of tax relief on mortgage interest. Together, these measures increased buying costs and reduced profits for some landlords, dampening demand for buy to let purchases.
Landlords have navigated these challenges by cutting costs, raising rents, and targeting higher-yielding properties predominantly in the north of England.
This shift makes sense when the yield data highlights such a strong geographical divide: the average overall yield is 7.1%, but the North East boasts yields of 9.7% compared to 5.7% in London. London-based landlords are buying further afield, with nearly 70% purchasing properties outside the capital last year.
Landlords have also adapted to rising costs by setting up limited company structures. There are now 390,000 buy to let companies across the UK, with 61,500 companies set up in the last year alone. Hamptons data shows that 70-75% of new buy-to-let purchases are now going into a limited company.
Holding a rental property in a limited company has potential tax advantages. It allows landlords to offset most costs, including mortgage interest, plus landlords pay corporation tax of 19% on profits instead of income tax.
Limited company mortgages were historically few and far between and carried a rate premium, but competitive rates are now widely available.
The narrative about landlords selling up in their droves isn’t quite borne out by the data. While there has been a rise in landlords leaving the market since around 2016, it hasn’t been a significant acceleration.
What’s more apparent is the fall in landlord property purchases from the same time, although even that has stabilised. There are now 40% fewer homes to rent than in 2016, from a combination of more landlords selling and fewer buying. Of course, this supply squeeze has put upward pressure on rents.
Rental growth has been a ‘saving grace’ for landlords, said Hamptons, with substantial yield and rental income growth in recent years offsetting some of the cost increases.
Since 2019, rents have risen by 35%, with tenants paying an extra £4,214 a year. Rental growth on newly let properties has seen record-breaking increases, peaking at 12% growth in September 2023.
Despite rental growth slowing to 2% year-on-year by December 2024, renewal rents have continued to climb by 8-9% annually.
Looking ahead, Hamptons predicts rental growth will remain steady at around 4% a year, outpacing modest house price growth of 3% annually.
Yields on new buy-to-let purchases are also expected to rise, hitting 7.3% by the end of 2027. If saving rates fall to around 3% with base rate cuts, buy to let starts to look comparatively attractive and we could see a resurgence in activity.
A lot depends on how many more interest rate cuts we see this year, if any.
Regulation is par for the course for landlords, but the Renters’ Rights Bill represents a significant shift. Hamptons suggested that these sweeping changes could ‘draw a line in the sand’ for regulation of this market after a busy 10 years.
Key proposals include:
These changes aim to create a fairer rental market, but landlords are concerned about unintended consequences, such as difficulties evicting tenants and increased void periods, particularly in the short-term let and student rental sectors.
There are also proposals to tighten energy-efficiency standards, raising the minimum EPC rating to a C by 2030. If this happens, 340,000 rental homes a year would need to be improved for the next five years to achieve the target, with obvious costs to landlords. However, the detail on this is still lacking.
Strong rental demand, limited supply, and rising yields continue to make buy-to-let investments attractive, particularly in northern regions. With rental growth forecast to outpace house price inflation and possibly beat savings rates, property becomes an appealing asset class for investors.
Regulation always presents challenges, but change is a constant force in this market. Those landlords who are proactive about planning for these regulatory shifts will adapt as necessary and continue to thrive in the sector.
Aldermore's Get more with Aldermore webinars continue monthly. If you would like to attend, please contact stephen.wright@aldermore.co.uk for more information.