Why there is still money in property — and how to get it

Landlords’ profits have been squeezed by rising interest rates and tougher tax rules but you can make a good income if you know where to buy

Jack Simpson, Money Reporter

Friday November 21 2025, 6.00am GMT, The Times

The golden age of property investment is over. Between 1980 and 2016 house prices went up an average of 6.7 per cent a year, with investors snapping up buy-to-lets and flipping homes quickly for profit.

But in the past decade prices have risen just 3.7 per cent a year, making other investments seem a lot more attractive.

A £100 investment in UK property in 2016 would have been worth £134 by July of this year, according to the financial advice firm Rathbones. But if you had invested £25 in UK stocks and £75 in global stocks at the same time, you would now have £174.

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This, combined with higher mortgage costs, increased stamp duty rates and an influx of new regulations, has put many off the idea of being a landlords, while others are rushing to sell up.

But can you still make money from property? And if so, how? Here’s what you need to know.

The burden on landlords

Sluggish property prices is just one of the factors that have made it harder to profit from property.

Ben Beadle from the National Residential Landlord Association said: “Tax increases over the past ten years, together with a creeping anti-landlord rhetoric, are clearly putting off investment in new homes to rent.”

Landlords have suffered from the loss of mortgage interest relief, which allowed them to deduct borrowing costs from rental profits before declaring their income for tax. It was phased out between 2017 and 2020 and replaced with a basic rate tax credit, meaning that higher and additional rate taxpayers, who pay tax at 40 per cent and 45 per cent, have lost out.

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David Fell from the estate agency Hamptons said: “Not being able to offset your full mortgage costs has certainly made things difficult for landlords, particularly in areas where rental yields tend to be lower. Rising interest rates have pushed some landlords into unviable territory.”

The average buy-to-let five-year fixed rate was 3.72 per cent in November 2016, according to Moneyfacts. Now it is 5.18 per cent.

Those seeking buy-to-lets or investment properties also face higher buying costs, with Rachel Reeves increasing the stamp duty surcharge on additional properties in October last year. It went from 3 per cent to 5 per cent of a property’s value.

And new energy rules will mean that rental properties in England and Wales will need an energy performance certificate (EPC) rating of C or above by 2028, or 2030 for existing tenancies.

In Scotland all new tenancies must already have an EPC rating of C and existing tenancies must reach that level by 2028. The estate agency Knight Frank said that upgrading a property from a D to a C rating typically costs landlords £5,500.

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The Renters’ Reform Bill, which was made law last month, is also likely to drive up costs. Its flagship reform is the abolition of “no-fault” evictions, used by landlords to evict tenants with two months’ notice and without having to give a reason. The bill also gives tenants greater rights to challenge rent increases.

Lucian Cook from Savills said: “This will change the face of buy-to-let investing, concentrating activity among larger, wealthier landlords who are best placed to handle the regulatory change and spread their investment risk across a portfolio of properties.”

The good news for landlords

Despite these rising costs, buy-to-let investors are enjoying record rental yields — the percentage of a property’s value that you can recoup in rent over a year — as rental demand far outstrips supply.

The average tenant in England and Wales paid £1,398 a month in September, up 34 per cent from 2020, according to Hamptons. In the North West of England, rents were up 46 per cent. The average rental yield is also up from 6 per cent in 2020 to 7.1 per cent this year.

Fell said: “Most landlords are on interest-only deals so have been hit by some of the largest interest rate increases. But some of that pain has been absorbed by these higher rents.”

Rob Dix from the landlord advice site Property Hub said that property was still more attractive than other investments.

He used the example of a £300,000 property, with a £200,000 interest-only mortgage that was covered by the rent: “If your property goes up in value 3 per cent a year for a decade, which isn’t unrealistic, it will have gone from £300,000 to £400,000, but your debt is the same as it was on day one.

“You’ve benefited from 100 per cent of the property price growth while only putting in a third of the money, effectively.

“It makes it so compelling and almost unfair compared with other investments, because you can borrow large amounts of money and, unlike the volatility of the stock market, it provides relatively predictable returns.”

How to boost profits

There are ways for landlords to shield themselves from some costs. A popular tactic is to set up a limited company, which can protect buy-to-let profits from the taxman.

Landlords who hold property in their own name get a tax credit on their mortgage interest at the 20 per cent basic rate but those who own through a corporate structure can deduct 100 per cent of their borrowing costs from their tax bill.

Buying through a company also means paying corporation tax on earnings, set at a rate of between 19 per cent and 25 per cent, rather than income tax, which is 40 per cent on income between £50,271 and £125,140, and 45 per cent above that. Companies can also claim a wider range of expenses against their tax bill.

In September 6,493 landlord companies were registered, the highest monthly tally since such data was first collected in 2007. There are now more than 400,000 buy-to-let companies in the UK.

But setting yourself up as a business doesn’t work for everyone. Buy-to-let mortgage rates can be higher for companies than for individual landlords and transferring properties in your name to an incorporated company can lead to legal costs and you can be charged stamp duty on the property’s value after the transfer.

Choosing the right location could be a simpler way of boosting yield. Dix said: “It used to be the case that you’d get better rental yields in the north of England but better capital growth in the south. Now that’s not the case at all. You still get better yields in the north but you get better growth on value too.”

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Savills forecasts put house price growth in Yorkshire and Humber and the North East at 28.8 per cent over the next five years, well above the 22 per cent average it expects for the rest of the UK. Prices are expected to rise 13.6 per cent in London and 17 per cent in the South East of England.

Hamptons found earlier this year that landlords were achieving average yields of 7.9 per cent in Yorkshire and Humber, 8.2 per cent in the North West of England and 9.3 per cent across the North East.

And because of this, the North East in particular is bucking the trend of falling buy-to-let interest. In the first three months of the year 28 per cent of all property purchases in the North East were by investors compared with 9.7 per cent of all homes bought in the UK.

But Cook believes that those with more cash to play with may want to look at other parts of the market. He said: “Those carrying debt are more likely to focus on smaller properties in the north where yields are strongest but those with more equity will cast their net wider, with more of a focus on the small family house market where demand is growing the most and the capital growth prospects may be better.”

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