Landlords in the UK private rental sector are anticipating 2025 will be a defining moment for their business, with a mixed bag of changes on the horizon.
Upcoming new regulations, slowing rent increases and evolving tenant needs are creating challenges, but the potential for new opportunities, including signs of market stabilisation, are providing a more positive forecast.
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Experts believe 2025 will spur landlords to adapt to a changing rental market, with issues they formerly prioritised taking more of a back seat.
Slowing rent increases
Between 2009 and 2022, the average rent for private tenants in the UK increased steadily from £153 to £231 per week and annual rent inflation remained constant at around 3.71%. However, in August 2023, annual rental inflation had risen to 6.1% compared with August 2022, as the UK economic crisis hit hard and prices increased across the board. Landlords had no choice other than to increase rents as their own costs went up significantly.
In March 2024, the Office for National Statistics reported a record rise of around 9% in the UK, with the highest increase of 10.9% being in Scotland, compared with 9% in Wales and 8.8% in England.
Now rental prices are still rising, but much more slowly again, averaging between 3% and 4% for new lets. Analysts say the slowdown reflects how tenants’ budgets are beginning to drive the market, as people simply can’t afford to rent expensive properties. Analysts predict landlords who offer fair rent prices for well-maintained properties will be able to enjoy stable returns.
While the rental sector is still the preferred choice for people who can’t afford to take out a mortgage, it’s crucial for landlords to remain responsive to market conditions in 2025.
Adapting to rental market 2025
The key to landlord survival is adapting accordingly to changes and ensuring profitability.
According to research by the National Residential Landlords’ Association, 41% of landlords have indicated they’re likely to sell some properties during the next year. Between 2023 and 2024, 19% of landlords sold at least some of their portfolio, mainly for financial reasons, while 8% bought new rental properties.
Despite demand for rented homes remaining high, 12% of landlords have left the sector altogether. Many are simply reshaping their portfolio to meet changing tenant demands for higher quality homes, offloading properties they can no longer afford to maintain.
Mortgage rates have steadied recently, remaining at around 4%, which is making homes more affordable for first-time buyers. If more people decide to buy rather than rent, this could ease the high demand for buy-to-let properties.
New landlord rules 2025
Legislative changes are set to impact landlords in 2025, with possible policy changes that could reduce profits. The proposed Renters’ Rights Bill, which is currently making its way through Parliament, is expected to force major changes in the buy-to-let market.
The government has released some details of the RRB, but the full impact is not fully clear as yet. The Bill had its first reading on 11th September 2024 in the House of Commons and has now moved onto the Report stage.
According to analysts at Property Rescue, the Bill could pass through the Commons to the House of Lords between January and March 2025, considering its current momentum and progress. If there are no delays, it could be sent for Royal Assent (typically a formality) by April 2025, before becoming law soon afterwards.
The key points include abolishing Section 21 evictions (“no fault” evictions) to provide more security for tenants; introducing a Private Rented Sector Landlord Ombudsman to provide impartial and binding resolutions to tenant complaints; and launching a new database to help private sector landlords and tenants to understand their legal obligations and rights.
Many provisions of the Bill apply to England, but some also affect Wales. Landlords in Wales should be aware that it will become unlawful to discriminate against tenants with children or those receiving benefits. This means rental properties in Wales cannot be marketed with blanket bans on benefit recipients or families. Under the new legislation, landlords must assess tenants’ individual circumstances to determine if a property meets their needs. However, the Bill allows landlords to consider income and affordability, offering protection for landlords.
While existing insurance or mortgage agreements containing discriminatory clauses will still be valid in Wales until they are either renewed or expire, once the Bill is implemented, these terms won’t be enforceable in any new agreements drawn up. This means landlords can’t be forced to discriminate against tenants either by their insurer or mortgage lender.
The Welsh government will also have additional powers under the Bill to expand the ban on discrimination to other demographics of tenants. The Welsh Government hasn’t yet indicated which other tenant categories may be included in the anti-discrimination legislation and it’s understood a consultation will take place on any proposed changes before they become law.
The Housing (Scotland) Bill, set for consultation in spring 2025, proposes reforms to ensure affordable, safe, and secure housing. Key measures include a rent cap to protect tenants from excessive increases while being fair to landlords, and the creation of a Private Sector Landlord Ombudsman with a mandatory landlord registry.
The bill also updates legislation to address health hazards like damp and mould, and extends the Decent Homes Standard to private rentals.
The new laws don’t affect landlords and tenants in Northern Ireland, where the sector is governed by the Private Tenancies Act (Northern Ireland) 2022, which became law on 1st April 2023.
Energy efficiency regulations
Landlord responsibilities to ensure their rental properties in England and Wales are more energy efficient look set to be under the spotlight again, thanks to the new Labour government.
In 2023, the Conservatives scrapped plans for private rental properties to have a minimum Energy Performance Certificate rating of C if being let to new tenants from April 2025. The legislation had been due to extend to existing tenancies by April 2028.
However, in its election manifesto, the Labour party said it was committed to ensuring homes in the private rented sector would meet minimum EPC standards by 2030, suggesting it would reintroduce the legislation.
In Scotland, private landlords must ensure their properties have an EPC rating of D and above, although landlords are expected to upgrade their properties to a C rating during 2025.
All rental properties in Northern Ireland must have an Energy Performance Certificate, but currently, there’s no minimum efficiency rating required.
Decent Homes Standard
During the King’s Speech on 17th July 2024 to mark the State Opening of Parliament, the government committed to introducing a new Decent Homes Standard in the private rented sector, but no further details have been released since. Responsible landlords who already provide quality homes for tenants will have nothing to fear.
A study of 1,000 UK tenants and 500 landlords by Endsleigh insurance revealed four in five tenants were satisfied with their current landlord. Among top requirements were high speed Wi-Fi and good quality fixtures and fittings, with landlord furniture packages being many landlords’ preferred choice to meet their tenant needs.
The focus in 2025 will be on keeping up to speed with new regulations, with more stable mortgage rates providing positive indications, but will impending changes such as the RBB and energy efficiency laws remain a cause for concern? Only time will tell.