The Intermediary – March 2025 - Flipbook - Page 19
SPECIALIST FINANCE
In focus
Landlords positive,
but uncertainties
loom large
I
nterest rates are falling,
rental prices remain on an
upward trajectory, and house
prices continue to grow,
instilling a sense of optimism
among landlords. However,
the new tax year is just around the
corner, and it promises to bring
fresh complexities. Meanwhile, the
broader economic outlook remains
uncertain, and tenant affordability
remains a concern. How are
landlords navigating these competing
forces? Market Financial Solutions
commissioned a survey of 300 UK
landlords to gauge their confidence,
investment plans, and key concerns in
the lead-up to the 2025-26 tax tear.
Confidence in the market
Despite various headwinds, landlords
remain largely optimistic.
The survey revealed that 36% are
planning to expand their portfolios
this year, compared to just 9% who
intend to reduce the number of
properties they own. This indicates
that the strong end to 2024 – when
a Royal Institution of Chartered
Surveyors (RICS) survey suggested
the market finished the year on “firm
footing” – has created a more positive
investment environment in the first
few months of 2025.
This is supported by recent research
from Simply Business, which revealed
that London saw a 13% rise in the
number of new landlords between
2023 and 2024. Similar growth was
felt in Birmingham (12%), Leeds (11%)
and Manchester (10%), contradicting
the oen-negative media narrative
surrounding the buy-to-let (BTL)
sector and highlighting that investors
remain confident in the long-term
viability of the BTL sector.
A key factor driving this optimism
is the expectation that property prices
will continue to rise. More than
half (54%) of the landlords said they
anticipate average house price will
increase over the next 12 months,
while 39% believe values will remain
stable. Nationwide’s latest house price
index showed a 3.9% rise in average
prices over the past year.
However, while 43% of landlords
expect rental yields to improve
in 2025, this figure indicates that
some uncertainty remains. Since
stronger rental yields are closely tied
to lower borrowing costs, it appears
that many landlords are waiting for
more substantial rate cuts before
expressing greater confidence in their
investment outlook.
However, recent rental yield data
paints a brighter picture. Indeed,
average yields reached 6.93% in Q4
last year, which represents a 13-year
high. What’s more, yields have felt
sustained growth year-on-year since
2022. There are clearly factors that are
tempering landlord confidence.
Key challenges in play
In fact, Market Financial Solutions’
data suggests that there are three
primary concerns that landlords
believe will impact their portfolios
in the coming months. The first
major concern is tenants’ ability
to keep up with rental payments.
Two in five (41%) landlords cited
this as a significant risk, which may
explain why 61% opted to keep rents
unchanged in 2024 and why less than
half (47%) plan to raise them in 2025.
Connected to this is the fact that
35% of landlords expressed concerns
about domestic economic instability.
A similar number (28%) pointed to
global economic instability as a key
risk, which highlights the broader
uncertainties that are influencing
landlord confidence.
PARESH RAJA
is CEO at Market
Financial Solutions
The long-term impact of these
trends remains uncertain, but if
inflation stays close to the Bank of
England’s 2% target and further rate
cuts support economic growth, these
concerns could ease over time.
That said, worries about
Government intervention in the
property sector are also widespread.
For example, 65% of our landlords
either ‘somewhat agreed’ or ‘strongly
agreed’ that ‘the policies announced
in the autumn Budget will have a
negative impact on their property
investments’, while 64% have decided
to pause on making new property
investments due to concerns around
incoming regulatory and tax changes.
This is understandable, given the
wave of reforms on the horizon, the
Renters’ Reform Bill, further clarity
on energy efficiency requirements
expected later this year, and from
April, rising Stamp Duty costs.
We anticipate a growing number
of landlords seeking guidance on
managing their tax and regulatory
obligations in the lead-up to the new
tax year on 6th April.
Specialists step up
It’s important that lenders and brokers
alike monitor and adapt to these
trends. Offering products that provide
flexibility and certainty will be key for
landlords navigating market shis,
while ensuring that they are abreast of
legislative changes will empower them
to make beer-informed decisions
about their portfolios.
If the specialist lending sector
exhibits these qualities and rises
to meet these challenges, there’s
every reason to believe the BTL
market will continue to thrive in the
coming year. ●
March 2025 | The Intermediary
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