Essential Details Landlords Need To Know In 2025

 

After a year influenced by the general election and uncertainty regarding future legislation, what can residential landlords anticipate in 2025? Our Lettings team at Quealy & Co. examine five predictions for the UK rental market, which cover the following topics:

• The Renters’ Rights Bill
• Energy efficiency standards
• Stamp duty changes
• Average property prices
• Rental growth and demand

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1. The Renters' Rights Bill is on track to become law

The Renters’ Rights Bill is set to bring about the most significant changes to tenancy law in a generation, including eliminating Section 21 evictions and ending fixed-term tenancies.

After making steady progress in the autumn of 2024, the bill entered 2025 at the report stage in the House of Commons. It must still pass through a third reading and the House of Lords before receiving Royal Assent and becoming law.

While initial predictions suggested that the Renters' Rights Bill would become law in spring 2025, it is more likely to be enacted as the Renters’ Rights Act by the end of the year. This timeline gives landlords ample opportunity to prepare for the upcoming changes.

Landlords should prioritise their preparation, which includes familiarising themselves with the proposed new eviction process and removing rent review clauses from tenancy agreements. Recognising that these changes could significantly impact landlords, potentially affecting their cash flow and overall profitability, is essential.

Despite the urgency surrounding these new laws, many landlords, as indicated by the government’s English Private Landlord Survey 2024, remain unaware of the Renters’ Rights Bill. Landlords must stay informed and understand the implications of this legislation.

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2. Information regarding updates to Energy Efficiency Regulations

In 2025, the Labour government is expected to release more information about its plans to enhance energy efficiency in rental properties.

The proposed changes aim to raise the minimum Energy Performance Certificate (EPC) rating from E to C by 2030. This shift may require landlords to make significant property investments to comply with the new standards. However, these changes could result in long-term cost savings and increased property value.

At this stage, no additional details have been published. A consultation will likely occur first, addressing key aspects such as exemptions, cost caps, and enforcement timelines.

It is evident that the new regulations, regardless of their final form, could impose substantial costs on many landlords.

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3. The effects of the changes to stamp duty are becoming evident

In the Autumn Budget 2024, the government announced an increase in the stamp duty surcharge for landlords, rising from three to five per cent. Additionally, starting in April 2025, the threshold at which property buyers must pay stamp duty will be reduced from £250,000 to £125,000.

As a result of this change, landlords purchasing less expensive properties will encounter higher stamp duty costs. This situation highlights the importance of caution and careful financial planning for prospective buyers.

For example, a landlord buying a property for £240,000 will pay:

five per cent on the first £125,000 = £6,250

seven per cent on the next £115,000 = £8,050

This will leave them with a stamp duty bill of £14,300.

Before April 2025, a landlord buying a property for £240,000 will pay £12,000.

There is anticipated to be a surge in transactions before the threshold changes in April. After that, activity is likely to decrease. However, potential increases in stamp duty could be balanced by reduced mortgage interest rates.

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4. Property values are expected to keep rising

Average property prices in the UK remain strong, showing healthy growth in late 2024. This follows a period of slower growth and slight declines between 2022 and early 2024.

Rightmove predicts that average asking prices will increase by four per cent by the end of 2025, leading to over one million transactions. The property portal anticipates that lower average mortgage rates will drive this activity. Additionally, the early part of the year could be busy as buyers rush to purchase before a potential stamp duty hike.

Challenging market conditions may result in fewer landlords purchasing new properties in 2025. Although rising costs have tightened profit margins, the long-term stability of average house prices means many landlords can still expect a healthy yield in 2025.

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5. Average rents are expected to stay high because of strong demand

Average property prices in the UK are showing strong growth, particularly in late 2024. This follows a period of slower growth and slight declines from 2022 to early 2024.

Rightmove forecasts that the average asking prices will increase by four per cent by the end of 2025, leading to over one million transactions. The property portal expects this activity to be driven by lower average mortgage rates. Additionally, the beginning of the year may see a surge in activity as buyers hurry to make purchases before a potential hike in stamp duty.

However, challenging market conditions may lead to fewer landlords purchasing new properties in 2025. Although rising costs have tightened profit margins, the long-term stability of average house prices suggests that many landlords can still anticipate a healthy yield in 2025.

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What else should landlords look out for in 2025?

As well as hot topics like the Renters’ Rights Bill and proposed changes to energy efficiency rules, some of the other things landlords should keep an eye on in 2025 include:

• Making Tax Digital – landlords who earn over £50,000 a year in property income will need to be compliant with Making Tax Digital by April 2026
• Short-term lets regulation – the Labour government looks set to pick up where the Conservatives left off in tightening regulation on holiday homes and short-term lets
• Furnished holiday lets tax system to be scrapped – from April 2025, holiday let owners will no longer receive tax benefits on mortgage interest, capital allowances, and selling a property
• More landlord licensing – more selective licensing schemes were introduced in 2024, with several consultations for new schemes in 2025 underway
• Tax costs to keep rising – frozen income tax thresholds and the impact of Section 24 changes will mean many landlords’ HMRC bills will continue to increase in 2025

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Do you need more information about changing legislation?

Quealy & Co is your go-to expert for rental property management in North Kent. We encourage our clients to reach out to us to discuss any proposed changes so we can provide guidance.

Call us at 01795 429836 or email us at hello@quealy.co.uk to speak with a friendly and experienced member of our team about anything related to your rental property.

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Note: The information in this article is based on data as of early January 2025 and may change. Always seek professional advice for your specific circumstances.