As the UK prepares for the upcoming October Budget, expected to bring significant tax changes, the Private Rented Sector (PRS) faces new challenges. With potential increases in Capital Gains and Inheritance Tax on the horizon, some landlords have already begun selling their rental properties, sparking concerns across the sector. However, experts remain optimistic about the future, as both demand and investment in rental properties continue to grow.
Landlords react to tax changes
Recent data from Rightmove reveals that 18% of former rental homes have been listed for sale, the highest proportion on record. Although this has raised fears of a mass landlord exodus, Rightmove insists the situation doesn’t yet indicate widespread departures, but suggests it is worth monitoring for long-term effects.
Marc Grundherr, Director at Benham and Reeves, shared his perspective on the situation: “If the Labour government imposes a significant tax increase on landlords, this would be another blow to those who provide vital housing stock. Despite this, we’re simply not seeing the exodus of landlords that is so often reported… buy to let remains a strong investment. It’s certainly one that most take with a very long-term view, and they expect ups and downs, but generally speaking, the returns are consistently good.”
Growing demand in a changing rental landscape
One key factor keeping the PRS buoyant is the high demand for rental properties. Rental yields remain healthy, and the number of renters is rising as more people delay buying a home. According to Uswitch, a third of first-time buyers are now aged over 35, with 20% aged 35-44 and 13% over 45. As a result, renters are staying in the PRS for longer, leading to an increase in tenancy lengths.
The Build to Rent (BTR) sector has also experienced significant growth. Last week, Legal and General announced that its Slate Yard development in Manchester, comprising 424 luxury apartments, was available for investment at a guide price of £110 million. The development offers a range of amenities, including a gym, residents’ lounge, co-working spaces, and 24/7 concierge services. Legal and General has invested over £3 billion in 24 BTR schemes across 13 UK cities, demonstrating confidence in the future of the rental market.
Technology and regulation: the way forward for landlords
While larger investors dominate city-centre developments, many smaller landlords operating in suburban areas are expressing concerns about increasing bureaucracy. However, the introduction of higher standards and more robust regulations is seen by many as a positive step for the industry in the long term.
Gary Wright, CEO of flatfair, believes that technology will play a crucial role in helping landlords adapt to these changes: “Bureaucracy is becoming overwhelming, but technology is the solution—it saves time, money, and provides evidence of compliance.”
Flatfair, for example, utilises open banking technology to automatically register traditional deposits with major UK deposit schemes. This integration helps avoid missed deadlines and human errors, saving agents and landlords approximately an hour of administrative work per tenancy. Tenants benefit from reduced move-in costs by up to £1,000, while landlords gain double protection for potential damages or unpaid rent.
Flatfair also integrates with leading referencing providers, such as HomeLet and Homeppl, ensuring that only the highest quality tenants are approved to rent properties. Wright adds: “Increased regulation doesn’t have to mean an increased workload. We’re all going to have to work smarter, not harder.”
A brighter future for the PRS
As the UK’s PRS continues to evolve, landlords must adapt to new regulations, changing market conditions, and the growing influence of technology. With continued demand for rental properties and the increasing appeal of Build to Rent developments, the sector remains a strong investment.
While the October Budget may bring new challenges, industry leaders like Gary Wright and Marc Grundherr remain optimistic about the future of the PRS, with Wright concluding: “If that’s the brave new world for the PRS, we’re looking forward to it.”
