Buy-to-Let Market 2024: A Round-Up and Top Towns to Invest in for 2025

Buy-to-Let Market Insights 2024: Top Investment Hotspots for 2025

The Buy-to-Let (BTL) market has experienced significant shifts in 2024, shaped by higher interest rates, evolving tenant demand, and tightening regulations. As we approach the end of the year, it's essential for investors to reflect on the market's performance and look ahead to 2025 for the best opportunities.

In this blog, we'll take stock of the current Buy-to-Let market in 2024, discuss the key trends that have shaped the sector, and highlight some of the best towns and cities to consider for Buy-to-Let investment in 2025.

Buy-to-Let Market 2024: Key Trends and Insights

As 2024 draws to a close, the Buy-to-Let market has seen a series of developments that have had both positive and negative impacts on investors. Here’s a recap of the most important trends and what they mean for landlords.

1. Rising Interest Rates and Affordability Challenges

Interest rates in 2024 have remained elevated due to the Bank of England’s strategy to tackle inflation. With the base rate hovering around 4.5%, investors have faced higher mortgage costs, particularly if they have variable-rate mortgages or are coming to the end of a fixed-rate deal. This has led to higher monthly repayments and, for some landlords, squeezed profit margins.

Impact on Investors: Many landlords are opting for longer-term fixed-rate mortgages to lock in current rates. While this offers stability, it comes at a cost, particularly for investors with smaller portfolios who are more sensitive to changes in cash flow.

2. Strong Rental Demand Amid Housing Shortage

Despite the increased cost of borrowing, demand for rental properties has remained strong in 2024. The ongoing housing crisis, combined with affordability challenges for first-time buyers, has kept many people in the rental market for longer. There has also been a shift in tenant preferences, with many choosing to rent for longer periods due to high property prices and the rising cost of homeownership.

Impact on Investors: Strong rental demand has provided landlords with more flexibility when setting rents, especially in regions with housing shortages. However, landlords need to remain mindful of the risk of affordability issues for tenants, particularly in areas where rent increases may outpace wage growth.

3. Regulatory Pressures and Tax Changes

Landlords have faced increasing regulatory pressure in 2024, particularly with the continued impact of Section 24, which limits landlords’ ability to offset mortgage interest payments against rental income. New regulations related to energy efficiency (such as the Minimum Energy Efficiency Standards, or MEES) are also starting to take hold, pushing landlords to invest in green upgrades to maintain rental income.

Impact on Investors: Landlords are becoming more strategic in structuring their portfolios, with many choosing to incorporate properties into limited companies to reduce the impact of tax changes. Property upgrades and energy efficiency improvements are also becoming key considerations when assessing investment opportunities.

4. Regional Shifts and Demand for Affordable Locations

The rising cost of living and high property prices in major cities like London have led many investors to look outside of traditional hotspots. Northern cities, commuter towns, and smaller regions with affordable properties and strong rental yields have become increasingly attractive.

Impact on Investors: Many investors are looking beyond London for higher rental yields and better long-term growth prospects. The trend of regional diversification is expected to continue into 2025, as investors look for better value and higher returns.

Best Towns and Cities to Invest in for 2025: Where to Focus Next

Looking ahead to 2025, Buy-to-Let investors will need to adapt to the evolving market dynamics. The focus is likely to shift towards areas with affordable property prices, strong rental demand, and ongoing regeneration. Here are some of the best towns and cities to consider for Buy-to-Let investment in 2025.

1. Manchester: A Stronghold for Buy-to-Let Investment

Manchester has firmly established itself as one of the most lucrative cities for Buy-to-Let investment in recent years. Despite the higher borrowing costs, the city continues to attract significant investment due to its growing economy, strong rental demand, and ongoing regeneration.

Why Invest in Manchester in 2025?

• Strong Job Market: Manchester is a hub for industries such as finance, tech, media, and education, which fuels demand for rental properties.

• Regeneration Projects: The city’s regeneration initiatives, including the £1.3 billion Smithfield development and the £500 million HS2 station at Piccadilly, are expected to drive property prices and rental demand higher.

• High Rental Yields: Investors can achieve rental yields of 5-7% in many areas, with emerging neighbourhoods like Salford Quays, Ancoats, and Hulme offering strong returns.

2. Liverpool: Rising Star for Buy-to-Let Investors

Liverpool continues to perform well in 2024, offering strong rental yields and a growing tenant base. With its affordable property prices and diverse economy, Liverpool remains a prime destination for Buy-to-Let investors.

Why Invest in Liverpool in 2025?

• Affordable Property Prices: Compared to other major cities, Liverpool offers affordable entry points for investors, making it easier to achieve strong rental yields.

• Student and Professional Demand: Liverpool is home to a large student population and a growing number of young professionals, providing consistent rental demand.

• Regeneration and Growth: The £1 billion Liverpool Waters project and other major regeneration initiatives are likely to drive capital growth over the next decade.

• High Rental Yields: With yields of 7-9% in areas like Toxteth, the Baltic Triangle, and Lark Lane, Liverpool offers some of the best returns in the country.

3. Birmingham: Long-Term Growth Potential

While 2024 has been challenging for investors in Birmingham due to rising borrowing costs, the city remains one of the most attractive markets in the UK. With its strong economy, excellent transport links, and ongoing regeneration, Birmingham is poised for long-term growth.

Why Invest in Birmingham in 2025?

• Economic Growth: As a major financial and cultural hub, Birmingham’s economy continues to thrive, attracting businesses and residents.

• Infrastructure Investment: Large-scale regeneration projects like the HS2 development and the Smithfield project are set to reshape the city and provide significant capital appreciation potential for property owners.

• University Town: With over 60,000 students in the city, Birmingham’s student rental market remains robust.

• Rental Yields: Investors can expect yields of around 5-6% in popular areas like Digbeth, Moseley, and the Jewellery Quarter, with potential for higher returns in the outer suburbs.

4. Leeds: A Growing Hub for Professionals and Students

Leeds has long been one of the top cities for Buy-to-Let investment, and it continues to be a strong contender heading into 2025. The city’s diverse economy, combined with a large student population and affordable property prices, makes it a prime location for rental property investments.

Why Invest in Leeds in 2025?

• Strong Employment Growth: Leeds is a major financial, tech, and healthcare hub, drawing professionals from all over the UK.

• Regeneration Projects: The £400 million South Bank regeneration project and improvements to the city’s transport infrastructure are expected to further boost demand for housing.

• Large Student Market: With two major universities, Leeds offers strong demand for student properties.

• Rental Yields: Yields of around 6-7% can be achieved in areas like Headingley, Chapel Allerton, and the city centre.

5. Nottingham: Emerging as a Top Buy-to-Let Location

Nottingham is increasingly becoming a sought-after location for Buy-to-Let investors, thanks to its strong rental yields and ongoing development projects. The city offers affordability and high rental demand, making it an attractive option for investors looking for value and growth.

Why Invest in Nottingham in 2025?

• Student Rental Demand: With two major universities, Nottingham is a student rental hotspot, providing steady tenant demand.

• Economic Growth: The city is seeing strong investment in both residential and commercial properties, bolstered by the expansion of the local tech and creative sectors.

• Affordability: Property prices in Nottingham remain relatively affordable compared to cities like London and Manchester.

• Rental Yields: Yields of 6-8% can be found in student areas like Beeston, Lenton, and the city centre.

6. Wolverhampton: High Rental Yields and Regeneration

Wolverhampton remains one of the most affordable towns in the West Midlands, and it’s quickly becoming a favourite among Buy-to-Let investors. With its significant regeneration projects and strong rental demand, the town has a lot of potential for 2025.

Why Invest in Wolverhampton in 2025?

• Regeneration Projects: Wolverhampton’s £1 billion regeneration plan, including the West Midlands Interchange logistics hub, will likely drive property prices and rental demand up.

• Affordable Property Prices: Wolverhampton offers affordable property prices, meaning higher rental yields for investors.

• Strong Local Economy: The town’s diverse economy, driven by sectors like logistics, manufacturing, and retail, ensures ongoing rental demand.

• Rental Yields: Yields of 7-9% are common in areas such as Bilston, Wednesfield, and the city centre.

Conclusion: Buy-to-Let Investment Outlook for 2025

As we move into 2025, Buy-to-Let investors should focus on markets with affordable property prices, strong rental demand, and long-term growth potential. While rising interest rates and regulatory changes will continue to impact the market, cities and towns with ongoing regeneration and economic development will remain attractive to investors.

In particular, Manchester, Liverpool, Birmingham, and Leeds are likely to continue performing well, while Nottingham, Wolverhampton, and Tamworth represent up-and-coming areas with excellent potential for growth and high rental yields.

By selecting the right locations and staying informed about market trends, Buy-to-Let investors can position themselves for success in 2025 and beyond.