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2024 was an eventful year for London’s private rental market. Despite the new restrictions, higher tax obligations and various issues raised against shortlets, the rental property market continued to thrive. For City Relay, in particular, we observed higher growth rates compared to the average market data. Although the London rental market showed a modest 9% year-on-year (YoY) increase and 1% RevPAR (revenue per available room) growth, City Relay showed better results as we observed more than 16% year-on-year (YoY) RevPAR growth during October and November.
How did City Relay manage a higher growth rate compared to the market average? We studied historical data and anticipated the market conditions so we could realign our strategies. This helped us boost the performance of our properties.
This is the same strategy we’ll use as we enter 2025. With London’s rental market anticipating various changes this new year, this article will discuss 7 key issues you should focus on as you strategise for the coming months. From evolving regulations to new market trends, you’ll get tips on navigating these changes to keep your rental properties profitable.
7 Key Issues Shaping London’s Rental Market
The private rental market in London is constantly evolving. You need to keep up with the changes to position your property to benefit. If there are new regulations, you want to make your property compliant so its earning potential won’t be compromised. If there are new market trends, you need to align your letting strategy to incorporate them to increase occupancy rates.
As you consider your 2025 plans, here are 7 key issues that will affect London’s private rental market in 2025.
Renter’s Rights Bill 2024
The majority of the changes happening in London’s private rental market are connected to the Renter’s Rights Bill. While most of the details affect long-term leases, short-term rentals should still pay attention to them in case you need to shift to long-term letting agreements.
To summarise, the Renter’s Rights Bill introduces more stringent measures for UK landlords. The goal is to protect the rights of tenants and give them more security against unjust evictions. It also provides both tenants and landlords guidelines to settle disputes or facilitate legal evictions. While it seems biased towards the rights of tenants, this bill protects even the rights of landlords and property owners as well. It sets clear standards and rules to ensure rental agreements are fair for all.
Keep an eye on the progress of this bill and make sure your property is ready to comply once it takes effect. This will ensure your property’s earning potential won’t be compromised by the changes it will bring.
Higher Anti-Tourist Sentiments
Housing supply has been scarce and some people believe that short-term rentals are aggravating the situation. This is fueling the anti-tourist sentiments of locals where people are going against overtourism that’s disrupting local communities.
Since the tourism industry brings revenue to cities, some governments have chosen to solve the housing issues instead of limiting the influx of tourists. They hope that by making homes more available to locals, it’ll tone down these anti-tourism sentiments. This means governments have started putting restrictions on short-term rental properties – and you should pay attention to these restrictions to stay compliant.
This brings the next issue affecting the London private rental market.
Growing STR Limitations
Local councils have started to impose stricter limits on the days a property can be used for short-term letting. In London, the limit to bookings is 90 days a year. This leaves the property available for residents looking for long-term lease agreements. It hopes to solve the lack of permanent rental accommodations so locals have more options when it comes to rental properties.
If these limitations can ease the housing supply problem, it will keep locals from blaming tourists and the short-term letting industry. These restrictions also promote responsible hosting practices by forcing STR hosts to stay compliant and competitive.
Consider the STR limitations you have to comply with as you consider your letting strategy for this year. Use flexible letting to maximise your property’s earning potential. Assess your property to check if it can be used for short-term, mid-term and long-term letting. In case you want to stick to short-term letting, apply for planning permission so you’re allowed to shortlet your property for more than 90 days.
EPC Rating “C” Deadline
For the past few years, landlords and property owners have been trying to improve the Energy Performance Certificate (EPC) rating to meet the energy efficiency standards set by the UK government. Previously, all private rental homes should have an EPC rating of C by 2025. However, after studying the rate by which private rental properties have improved, the government observed that a lot of properties will fail to meet the deadline. With cost being one of the issues, the government has decided to move the deadline. Now, private rental properties have until 2030 to improve their EPC rating to C.
Of course, this doesn’t mean you should stay compliant. If you have yet to reach the minimum EPC rating, you might want to slowly update your properties. Complying now would give you fewer worries when the new deadline draws near.
Stamp Duty Land Tax Changes
By April 1, 2025, the Stamp Duty Land Tax rates will change and it will make property buyers pay thousands of pounds more. While this won’t affect existing rental properties, it will if you plan to purchase additional properties. Instead of 5%, you’ll have to pay a 7% stamp duty land tax if you’re buying a property valued at £125,000 to £250,000.
Keep these changes in mind in case you decide to expand your portfolio and buy a new property in the future.
Higher Market Saturation
London’s STR market is quite saturated. Guesty’s 2024 survey revealed that 58% of short-let property owners struggled with how saturated the London private rental market was. But this shows how strong the market is. Property investors recognise the income potential in the short-term letting sector so there’s been a significant growth in the number of STR properties in the city.
While this issue continues until 2025, it doesn’t mean you’re helpless against it. You just have to focus on making your property stand out. Working with a property expert would help you find the right marketing solutions to help your property thrive in the competitive environment in London.
No More Holiday Let Tax Benefits
In the past, holiday lets were allowed to claim certain tax deductions from mortgage interest, capital allowances and other tax relief exclusive to shortlets. It helped property owners enjoy higher profit margins. This tax relief will end by April 2025.
This will surely impact the profit of short-term rentals. Reassess your letting and pricing strategies to offset this change. Make sure any costs relying on these tax benefits will be taken from somewhere else.
Get Ready for the Private Rental Market Changes in 2025
London’s rental market is constantly evolving and property owners should be vigilant in monitoring these changes. Learning about these changes will help you realign your plans and strategies to position your property to benefit from them.
While keeping an eye on these updates can be tedious, there’s a way to make it simpler. Partner with a property management company that can give you prompt updates. They can manage your properties so you can enjoy a stress-free rental income. With them managing the daily operations of your rental properties, you’re free to focus on growing your portfolio.
Contact City Relay so you can navigate London’s volatile rental market with confidence and ease.
