Paresh Raja, CEO of Market Financial Solutions, delves deeper into his company’s latest research, which reveals how the UK’s buy-to-let landlords are managing their portfolios and what their plans are for the coming year…
The buy-to-let (BTL) market finds itself at something of a crossroads.
Interest 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.
So, how are landlords navigating these competing forces? To gain a clearer picture, 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 buy-to-let market
Despite various headwinds, landlords remain largely optimistic about the outlook for the BTL market.
Market Financial Solutions’ survey revealed that 36% of landlords 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 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 often-negative media narrative surrounding the 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 we surveyed said they anticipate average house price will increase over the next 12 months, while 39% believe values will remain stable. Nationwide data supports this view, with the latest house price index returning a 3.9% rise in average prices over the past year.
However, rental yields often provide the clearest insight into the health of the BTL market. And, 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 many landlords are waiting for more substantial rate cuts before expressing greater confidence in their investment outlook.
But recent rental yield data does paint a brighter picture. Indeed, average yields reached 6.93% in Q4 last year, which represents a 13-year high. What’s more, the same data indicate that yields have felt sustained growth year-on-year since 2022. Therefore, there are clearly factors that are tempering landlord confidence.
Key challenges remain 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.
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, the majority (65%) of our landlords either ‘somewhat agreed’ or ‘strongly agreed’ with the statement 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 any new property investments due to concerns around incoming regulatory and tax changes.
This hesitation is understandable, given the wave of reforms on the horizon. The Renters’ Reform Bill is progressing through Parliament, further clarity on energy efficiency requirements is expected later this year, and from April, stamp duty costs are set to rise.
As a result, 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 6 April.
The specialist lending sector must step up
Therefore, it’s important that lenders and brokers alike are monitoring and adapting to these trends. Offering products that provide flexibility and certainty will be key for landlords navigating market shifts, while ensuring that they are abreast of legislative changes will empower them to make better-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.
Paresh Raja is the founder and CEO of Market Financial Solutions, a London-based specialist lender that provides bridging loans and buy-to-let mortgages. Prior to establishing Market Financial Solutions in 2006, Paresh worked as a senior professional consultant in one of the top five management consultancy firms, and also set up an independent investment group.
