The UK property market will undergo significant reforms in 2025, with new laws designed to improve fairness for renters and buyers.
Although these changes, announced by Chancellor Rachel Reeves, are expected to make life easier for renters, they can also impact landlords, buy-to-let (BTL) investors, and property owners. Buckle up as we help you prepare.
Key Changes for Landlords and Renters
The Renters’ Rights Bill introduces several measures that could reshape the private rental market:
No-Fault Evictions Abolished: Landlords will no longer be able to evict tenants without a valid legal reason. While this may limit flexibility for property owners, it could lead to more stable tenancies and reduce turnover costs.
Rent Increase Limits: Landlords can raise rents only once per year and must issue a formal notice. Tenants can challenge increases deemed excessive. This ensures transparency but may require landlords to be strategic in setting initial rents to reflect market rates.
No Bidding Wars: Landlords must advertise a fixed asking rent and cannot accept higher offers. This levels the playing field for tenants but may limit landlords’ ability to maximise income in competitive areas.
Pets in Rental Properties: Landlords must allow pets unless they have a strong reason to refuse. While this may increase wear and tear, landlords can require pet insurance to mitigate risks.
Leasehold Reforms Impacting Freehold Investors
The Leasehold and Freehold Reform Act will affect investors holding leasehold properties:
Quicker Freehold Access: Leaseholders can purchase their freehold or extend leases without waiting two years, potentially increasing competition for these properties.
Control Over Mixed-Use Buildings: More leaseholders will gain management rights, reducing reliance on freeholders. Landlords owning freehold interests in these buildings may need to adjust their strategies.
Commonhold Transition: The move to a commonhold system will eliminate the traditional leasehold model over time. While this simplifies ownership for flat buyers, it could reduce the profitability of freehold investments tied to service charges.
Stamp Duty Changes for BTL Investors
The stamp duty rules will change for landlords and buyers of second homes:
Higher Rates for Second Homes: From October 2025, an additional 5% stamp duty will apply to properties priced between £40,000 and £250,000. This could reduce yields for BTL investors but might also cool competition, creating opportunities for strategic purchases.
Adjustments for First-Time Buyers: Changes to first-time buyer relief may shift demand towards smaller properties, impacting market dynamics for landlords in this segment.
How These Changes Can Be Positive
While some measures may initially seem restrictive, they aim to create a more stable and transparent property market. Stable tenancies can reduce void periods, lower management costs, and foster long-term landlord-tenant relationships. Improved leasehold systems could increase property values as buyers gain confidence in fairer rules.
Investors and landlords who adapt to these changes, prioritise compliance, and focus on offering competitive, high-quality rental properties could find new opportunities in the evolving market. At the same time, these reforms make renting and buying fairer and more accessible for tenants and first-time buyers, contributing to a healthier housing market overall.
Preparation is Key
Landlords and investors should review their portfolios, update tenancy agreements, and plan for potential costs like higher stamp duty and property upgrades. By staying informed and proactive, you can minimise risks and take advantage of opportunities in the 2025 property market.