Is Now the Right Time to Invest in a Property or Grow a Portfolio?

Written on 9 March 2025 by Nicholas Mendes

The UK rental property market has been a focal point of discussion in recent years. Shifting tax policies, fluctuating property prices, and changes in interest rates have created both opportunities and challenges for investors. Landlords have also had to navigate evolving eviction rules, increased responsibilities, and changing tenant preferences. With a potential change in government on the horizon, further regulatory adjustments could be on the way.

Given these factors, is now the right time to invest in a buy-to-let property? To make an informed decision, it's crucial to understand recent tax changes, market trends, and the most promising investment locations.

The Impact of Recent Tax Changes

Tax reforms continue to shape the buy-to-let landscape, requiring investors to rethink their strategies. As of 1 April 2025, the Stamp Duty Land Tax (SDLT) surcharge on additional properties has increased from 3% to 5%, making upfront costs more significant. Additionally, potential Capital Gains Tax (CGT) changes could align CGT rates with income tax, increasing the tax burden for higher-rate taxpayers. To add to this, the government has frozen income tax thresholds until 2028, meaning many landlords may face higher tax liabilities over time.

These changes highlight the importance of structuring investments efficiently. Investors should consider whether purchasing in a personal name or through a limited company offers the most tax advantages. Consulting with a tax specialist can help determine the best course of action.

Market Trends: House Prices and Rental Yields

Despite the evolving tax environment, the UK property market remains resilient. House prices are projected to increase by 3.5% in 2025, largely due to the Bank of England’s decision to lower interest rates. Rental demand remains strong, with rents expected to rise by 4.0% nationally, driven by a continued shortage of available properties.

Mortgage rates have also stabilised, making borrowing more manageable than it was during the peak of rate hikes. For landlords, this means that while costs are rising, rental yields remain attractive, sustaining the viability of buy-to-let investments.

Is Buy to Let Worth it 2025 in the UK?

Yes, buy to let is still worth it in 2025 in the UK. With rents increasing, landlords can achieve strong rental yields, while mortgage rates are coming down, making borrowing more affordable. Additionally, property prices are rising, meaning investors could benefit from long-term capital growth. Despite regulatory challenges, the market conditions suggest buy-to-let remains a profitable investment opportunity.

Where Are the Best Buy-to-Let Investment Opportunities?

Regional variations in property values and rental yields make location a crucial consideration. The best-performing cities for buy-to-let investors currently include:

Manchester – agrowing hub for redevelopment, with rental yields reaching 10.1% in some areas
Leeds – particularly in the LS3 postcode, where yields exceed 8.5%, driven by affordable property prices and strong tenant demand
Glasgow – a hotspot for student accommodation and young professionals, making it a promising location for landlords
North East England – the region boasts an average rental yield of 9.3%, attracting investors looking for strong returns

Key Considerations for Expanding a Portfolio

Property investment isn’t just about location - it requires careful planning. Investors should assess:

Local market conditions – researching property values, tenant demand, and infrastructure development is vital for success
Upfront costs – with SDLT increases and mortgage fees, ensuring an investment remains financially viable is crucial
Tax planning – the right ownership structure can significantly impact profitability, so professional advice is recommended
Property management – investors must decide whether to manage properties themselves or use an agency for tenant relations and maintenance
Long-term viability – interest rate fluctuations can affect financing costs, so portfolios should be structured to withstand market changes

What is the Best Type of Property to Invest in the UK?

The best type of property to invest in the UK in 2025 depends on your goals, but affordable rental properties remain a strong choice. Houses in Multiple Occupation (HMOs) offer high rental yields due to multiple tenants. Family homes in commuter towns are also in demand as buyers and renters look for more space outside major cities. Additionally, student accommodation near top universities remains a stable investment. With rising property prices and strong rental demand, focusing on high-yield and growth areas will provide the best returns.

So, Is Investing in Property a Good Idea and Is It the Right Time?

Despite regulatory shifts and increasing tax obligations, the UK rental market continues to show strong fundamentals. The growing demand for rental properties, coupled with stabilising mortgage rates, means there are still attractive investment opportunities.

For those looking to expand their buy-to-let portfolio, now could be the right time - provided they conduct thorough research and plan their finances wisely. Working with a whole-of-market mortgage broker like John Charcol, alongside an experienced accountant, can provide valuable insights and help secure the best mortgage deals.