Key Insights For Property Investors
The UK property market is evolving rapidly, shaped by government policy, global events, and changing economic dynamics.
In this need-to-know report, Mark Homer, Co-Founder of Progressive Property & property TITAN, outlines his predictions for 2025 and shares actionable insights to help investors and property developers stay ahead.
Prediction 1: Rental Prices to Increase by 5%
Key Drivers:
Stamp Duty Increases:
The cost of buying a £160,000–£170,000 property is now around £8,000–£9,000 in stamp duty, discouraging new buy-to-let purchases.
EPC Regulation Changes:
By 2030, properties must achieve an EPC rating of at least C, deterring some investors due to upgrade costs.
Repeal of Section 21:
With landlords losing the ability to evict tenants without fault, many may exit the market, further reducing rental supply.
The combination of high taxes and tighter regulations will reduce the number of buy-to-let landlords, driving up rents. Investors should focus on optimising existing properties for higher yields and consider expanding into areas with limited rental supply.
For example, cities like Manchester, Birmingham, and Leeds have shown strong rental demand but remain affordable compared to London.
As tenants increasingly prioritise energy-efficient homes due to rising energy costs, landlords should proactively upgrade properties to improve EPC ratings. Such upgrades can also help secure higher rents, especially in a competitive market.
Prediction 2: Interest Rates Will Drop to 3.75%
Key Drivers:
Slower Economic Growth:
Forecast by the Office for Budget Responsibility.
Lower Inflation Levels:
Easing pressure on the Bank of England to maintain high rates.
With interest rates set to decrease from the current 4.75%, borrowing costs will ease, creating new opportunities for refinancing and acquisitions. Investors should prepare to act quickly to secure favorable deals as rates fall.
Refinancing existing properties at lower rates can free up equity, which can be reinvested in new projects.
Investors who have been holding off on expansions due to high borrowing costs may find 2025 to be the best time to grow their portfolios. This will be especially true for those operating in high-growth sectors like build-to-rent (BTR).
Prediction 3: Build-to-Rent (BTR) Sector Will Expand by 5-10%
Key Drivers:
Government Favouring Institutions:
Policies increasingly favour institutional investments over small landlords.
BTR Sector Growth:
Increased 23% between Q3 2023 and Q3 2024.
H3: Pipeline Expansion:
Over 150,000 new BTR units are currently in planning and construction.
Institutional investments in large-scale rental blocks and estates are reshaping the private rented sector (PRS). Smaller landlords should explore partnerships or transitions into this space to benefit from economies of scale and tax advantages, such as offsetting mortgage interest through limited companies.
Collaborations with established BTR operators could offer smaller investors a pathway into this lucrative market. The sector’s appeal lies in its ability to offer a professional tenant experience, including amenities such as gyms, co-working spaces, and communal lounges – features increasingly in demand by younger renters.
Prediction 4: HMO Rents Will Outperform Single-Let Rents
Key Drivers:
Rising Costs of Single-Let Properties:
Rent & bills for single-let properties have widened the gap with HMO rents.
Reduced Affordable Room Supply:
Balancing the market and driving up HMO room prices.
Example: In 2016, a one-bedroom flat in Peterborough cost £900 per month (including bills), while a high-end HMO room was £550. By 2024, the flat now costs £1,325 per month, while the HMO room is just £675 – a 100% price gap compared to 60% in 2016.
HMO properties are becoming increasingly attractive for tenants seeking affordability. Investors should consider diversifying portfolios to include HMOs, targeting high-demand areas where supply is constrained.
Modern HMOs that offer en-suite rooms, high-speed internet, and communal living spaces appeal to young professionals and students, ensuring high occupancy rates. However, investors must also navigate local licensing requirements, which vary widely between councils.
Prediction 5: The US Election’s Limited Impact on UK Property
Key Drivers:
Donald Trump’s Presidency:
May lead to global trade adjustments and tax reductions in the US.
Potential Ripple Effects:
On the UK economy through trade deals and economic policies.
While Trump’s election may influence global markets, its impact on the UK property sector is likely to be minimal in 2025. Investors should focus on domestic factors such as interest rates and regulatory changes.
However, global events often create unexpected opportunities. For example, changes in US monetary policy could influence foreign investment in UK real estate, particularly in prime London markets.
Prediction 6: Conversions of Retail and Office Spaces Will Increase
Key Drivers:
Removal of Caps:
On office-to-residential conversions and retail space developments.
Labour’s Promises:
To amend the National Planning Policy Framework (NPPF) to support housing delivery.
Permitted development rights (PDR) offer lucrative opportunities for converting underused retail and office spaces into residential units. Investors should capitalise on this trend by identifying prime locations and securing planning permissions early.
The shift toward remote work has left many office buildings underutilised, particularly in secondary cities. By converting these spaces into residential units, investors can cater to the growing demand for city-center living. Retail-to-residential conversions in high-street locations also present opportunities to revitalise struggling areas while meeting housing shortages.
Emerging Trends to Watch
In addition to the above predictions, several trends are likely to influence the property market in 2025:
Green Investments:
With sustainability becoming a key focus, properties with energy-efficient features will attract premium rents and valuations.
Co-Living Developments:
A hybrid between HMOs and BTR, co-living spaces appeal to young professionals seeking community and affordability.
Technology Integration: Smart home features, from energy monitoring to security systems, will become standard in new developments.
KEY RECOMMENDATIONS FOR 2025
Focus on High-Yielding Assets:
Diversify into HMOs and BTR projects to maximise rental income.
Leverage Falling Interest Rates:
Prepare to refinance or expand portfolios as borrowing costs decline.
Explore Conversion Opportunities:
Take advantage of PDR changes to repurpose commercial properties.
Adapt to Regulations:
Ensure properties meet EPC standards and adjust strategies for Section 21 changes.
Stay Educated:
Monitor market trends and government policies to pivot strategies effectively.
By aligning your strategy with these predictions, you can navigate the challenges and opportunities of 2025 and position yourself for long-term success.
Investors who remain proactive, adaptable, and informed will find themselves well-placed to seize emerging opportunities and weather any potential disruptions.
You always need to be one step ahead of the competition.
Whether you’re a seasoned developer or just starting your property investment journey, the key to success in 2025 lies in staying ahead of the curve.
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