The rental market continues to evolve as we head into 2025, with new insights from Zoopla and other key players shedding light on the challenges and opportunities ahead. Here’s what Cambridgeshire landlords need to know to stay ahead of the game.

Rental supply: a mixed picture

Zoopla predicts that the supply of rental homes will remain largely unchanged throughout 2025. While the number of available rental properties is 12% higher than this time last year, levels are still below pre-pandemic figures in all regions except the East Midlands.

Zoopla suggests that the peak of landlords leaving the market may now be behind us. Interestingly, a study by United Trust Bank (UTB) backs this up. Over half (58%) of brokers working with buy-to-let (BTL) landlords report clients aiming to expand their
portfolios rather than sell properties. Key findings include:

• Landlords are exploring higher-yielding options like HMOs and multi-unit blocks, which mitigate higher borrowing costs.
• Specialist BTL mortgages are becoming more popular as landlords look to acquire non-traditional properties, such as flats near commercial properties.
• UTB reports a 35% increase in BTL mortgage sales and a 53% rise in applications over the past year.

The future hinges on market conditions—particularly lower base rates and higher rental yields—before landlords feel confident enough to reinvest and expand supply.

Demand-supply imbalance and rising rents

Despite a slight seasonal dip in tenant demand, the ongoing mismatch between supply and demand means rental prices are expected to rise further. Zoopla forecasts a 4% increase in average rents for new lets over 2025, bringing the typical annual rental cost to £15,850. However, affordability concerns are creating noticeable disparities:

• London and Larger Cities: Rental growth will lag behind the UK average dueto affo rdability pressures and a modest increase in supply.
• Regional hotspots: towns such as Rochdale (up 11.9%), Blackburn (up10%), and Birkenhead (up 9%) are experiencing rapid rental growth, as renters gravitate toward areas around major cities.

What the experts are saying

Jeremy Leaf, former RICS chairman, highlights that affordability ceilings are defining the private rental sector. Demand is stabilizing, and only realistically priced properties are attracting offers. Smaller flats are gaining popularity over larger homes
due to affordability concerns.

The latest RICS Residential Survey reflects similar trends:

• Tenant demand declined slightly in November, marking the first drop since 2020, likely due to seasonal factors.
• Landlord instructions continue to fall, exacerbating the supply-demand imbalance.
• Despite this, rental prices are expected to rise, with a net balance of 29% of survey respondents predicting increases.

The sales market: a brighter outlook

While rental market dynamics are tightening, the sales market shows signs of recovery:

• House prices are rising, with a net balance of +25% in November, marking the fourth consecutive monthly increase.
• Buyer demand is holding steady, with new instructions rising for the fifth month in a row.
• Surveyors expect house prices to continue climbing over the next 12 months, despite challenges posed by higher mortgage rates.

Looking ahead

Zoopla’s 2025 forecast underscores the challenges facing Cambridgeshire landlords, from regulatory pressures to affordability constraints.

However, there are opportunities for those who adapt:

• Diversify portfolios: consider investing in higher-yield properties like HMOs or flats in less traditional locations.
• Keep up with regulations: staying compliant can help avoid costly setbacks and maintain long-term profitability.
• Monitor market trends: rental demand in affordable regions and smaller flats may offer better returns.

By staying informed and flexible, landlords can navigate these shifts and position themselves for success in 2025 and beyond.