To sell or not to sell?

Jan 20, 2025

To Sell or Not to Sell: The Rental Property Dilemma in England and Wales for 2025

As 2025 gets underway, landlords in England and Wales face a critical decision: should they exit the rental market and sell their property portfolios, or hold onto their investments? This complex issue has valid arguments on both sides, influenced by changing regulations, market conditions, and economic factors. Let’s explore the pros and cons of each option to help property investors make an informed decision.

Arguments for Selling Your Rental Property Portfolio

Increasing Regulatory Burden

The anticipated Renters Reform Bill is expected to introduce significant changes to the private rental sector (PRS) in 2025, including the end of Section 21 “no-fault” evictions, a strengthened Section 8 process, and mandatory registration of landlords. These changes will likely increase compliance requirements for landlords, potentially making property management more complex and time-consuming.

Reduced Flexibility

The abolition of fixed-term tenancies and the move to once-a-year rental increases, as proposed in the Renter’s Rights Bill, may limit landlords’ ability to adapt to market changes quickly. This reduced flexibility could make it harder to maximise returns on investment.

Energy Efficiency Requirements

By 2030, all privately rented homes will need to meet at least a C rating on their Energy Performance Certificate (EPC). Currently, only two-fifths of privately rented homes meet this standard, meaning many landlords face potentially significant costs to upgrade their properties.

Potential Market Peak

Some forecasts suggest that the rental market may be nearing its peak. Hamptons predicts rental growth will moderate to 4.5% in 2025 and 4% in both 2026 and 2027. Selling at the height of the market could maximise returns for landlords.

High Property Values

House prices are expected to rise by an average of 3% across the UK in 2025. This could present an opportunity for landlords to sell their properties at a profit, especially if they’ve held them for a significant period.

Arguments for Retaining Your Rental Property Portfolio

Continued Strong Demand

Despite some moderation, rental demand is expected to remain high in 2025. The proportion of private renters in the UK is predicted to increase from 20% of households in 2015 to nearly 29% by 2025. This sustained demand could ensure a steady income stream for landlords.

Rising Rental Income

Rents are forecast to continue rising, albeit at a slower pace. Savills predicts rental growth of 4.0% across the UK in 2025. This ongoing increase in rental income could provide landlords with improved returns, especially as mortgage rates are expected to stabilise.

Regional Opportunities

While some areas may be approaching an affordability ceiling, others still offer growth potential. For instance, London is expected to start outperforming other regions for the first time since 2015, with 4% annual price growth in 2025.

Limited New Supply

The supply of rental properties is not expected to increase significantly in the near term. A survey by the National Residential Landlords Association suggested that more landlords intend to sell property in the next 12 months than buy. This limited supply could help maintain or even increase rental values for those who retain their properties.

Long-term Investment Potential

Real estate has historically been a strong long-term investment. Despite short-term fluctuations, property values tend to appreciate over time, providing both rental income and capital growth.

Factors to Consider

When deciding whether to exit the rental market in 2025, landlords should consider several key factors:

Portfolio Composition

The decision may vary depending on the type and location of properties in your portfolio. Some areas may offer better growth prospects than others.

Management Capacity

Consider your ability and willingness to adapt to new regulations and potentially increased management responsibilities.

Market Timing

While it’s difficult to perfectly time the market, consider whether 2025 aligns with your investment strategy and market expectations.

Financial Position

Your current financial situation, including mortgage obligations and other debts, will play a crucial role in the decision-making process.

Investment Goals

Your long-term investment goals and risk tolerance should guide your decision. Are you looking for immediate profits or long-term wealth accumulation?

Conclusion

The decision to exit the rental market in England and Wales in 2025 is not straightforward. While increasing regulations and potential market peaks may tempt some landlords to sell, the ongoing strong demand for rentals and the possibility of continued rental growth provide compelling reasons to hold onto property investments.

Ultimately, the right choice will depend on individual circumstances, investment goals, and risk tolerance. Landlords should carefully analyse their specific situation, considering factors such as property location, financial position, and long-term objectives.

For those who decide to stay in the market, adapting to the changing landscape will be crucial. This may involve upgrading properties to meet energy efficiency standards, embracing technology for more efficient management, and staying informed about regulatory changes.

Conversely, landlords who choose to exit should plan carefully to maximise their returns. This might include timing the sale to coincide with favourable market conditions and considering tax implications.

Regardless of the decision, it’s clear that the rental market in England and Wales is evolving. Whether choosing to sell or retain their portfolios, landlords must stay informed and adaptable to navigate the challenges and opportunities that lie ahead in 2025 and beyond.

For an informal discussion on your investment or disposal strategy, call our Property Sales and Investment Specialist, Ross Pollard, on 0117 427 0099 or email him on [email protected]