Investigating UK Real Estate Profit Potential: Is It Still Financially Lucrative?
In the UK, the landscape for landlords has become increasingly challenging, as low profits and escalating costs continue to strain their finances. One such landlord, Phil Rosenberg, a 44-year-old science researcher, has six properties in Yorkshire on his portfolio. Although two bring a substantial profit through a limited company, the remaining four, owned personally, yield roughly £1,000 annually, leaving him with a slender margin.
The four properties are on fixed-rate deals established before 2022, when mortgage rates were relatively low. However, as each is remortgaged, the increased interest costs threaten to turn the £1,000 profit into a loss of over £2,500. Rosenberg remains hopeful that only a considerable decrease in mortgage rates can make these properties profitable again. In the meantime, he relies on the capital value increase of these properties to ensure his investment returns are viable.
A survey conducted by Ipsos for HM Revenue & Customs in June 2025 revealed that over half of landlords polled earned less than £10,000 from their portfolios. With rising costs, such as energy performance improvements, safety checks, and increased taxes like stamp duty and capital gains tax, it is no wonder that investor buying has plummeted to its lowest level since 2007.
Among the landlords feeling the pinch is Neil France, who owns four properties in the Wirral, near Liverpool. His properties currently have D energy efficiency ratings, in spite of having double glazing and insulation. The cost to upgrade them to the required C rating by 2030 will reach up to £12,000 per property, primarily on solar panels and other enhancements. The deadlines for newly tenanted homes are even earlier - 2028.
France's two-year fixed-rate mortgages exposed him quickly to interest rate rises, which commenced in 2022. As a result, his mortgage bill has surged from £30,000 to £46,000 on a gross annual turnover of £120,000. Despite boosting rentals, he struggles to cover the capital work necessary for energy efficiency improvements, which would demand at least four years to recoup costs, by which point he'll be 75. Consequently, he plans to sell his portfolio ahead of regulations coming into effect.
The struggle to maintain profitability in the realm of UK buy-to-let properties dates back to Margaret Thatcher's Right to Buy scheme in 1980, further encouraged by subsequent legislation and the introduction of buy-to-let mortgage products in 1996. Since then, however, the landscape has undergone an arguably unfavorable transformation, exemplified by the 2015 budget that introduced phased withdrawals of tax relief on mortgage interest, thus making buy-to-let investments less attractive.
Similarly, Harry Osborne, whose company owns six rental properties in Bath, Bristol, and Hampshire, finds it hard to navigate the market conditions. Following substantial renovations and extensions on many of his properties, Osborne has refrained from further investment as he grapples with higher material and labor costs, planning permission delays, and prolonged mortgage interest rates.
Many landlords are contemplating this question: is it still possible to generate income through property investments? An increasing number are inclined to think not. As profits dwindle or vanish entirely, many landlords are planning to sell their properties. According to the Ipsos survey, one in four landlords intends to sell at least one property within the next year.
Some landlords, like Neil France, are prepared to sell their properties to avert the costs associated with energy efficiency improvements required by changes to the Energy Performance Certificate (EPC) regime. The growing amount of time and financial resources needed to manage their portfolios has led others, such as France, to consider leaving the market entirely. His tenants' tendency to leave homes in poor condition after moving out exacerbates his frustrations as a landlord. In England, landlords are expected to verify tenants' right to live in the UK before a tenancy commences, many times checking an official website for foreign citizens' eligibility to avoid making errors.
With landlords experiencing the most severe financial pressures in the modern buy-to-let market, some are exploring alternate investment avenues. Neil Murtaza Kinili, who owns a fire safety business in London, recently acquired his first property through a limited company: a shop with a flat on top, on a high street in Swansea. As it is labeled a mixed-use investment, he is eligible for reduced stamp duty and avoids the additional residential surcharge of 5%. The increased rental income in the commercial sector and having two diversified rental streams make this net yield to him approximately 9%.
Mixed-use investments have become more popular among landlords since the October Budget, and Peter Williams, of propp.io, a property finance comparison site, reports a surge in customers choosing this type of investment over residential ones. Nevertheless, the majority of landlords (those with three or fewer properties) have borne the brunt of the tightest financial squeeze and are most likely to be selling up.
- Amidst the mounting pressure on landlords, Phil Rosenberg, despite his conveniently located properties in Yorkshire, is anticipating a significant financial loss due to increased interest rates on the remortgaging of his four personally-owned properties.
- As energy efficiency improvements and regulatory changes loom, Neil France, a landlord with properties in Wirral, faces an estimated £12,000 expenditure on each property to meet the required C energy efficiency rating by 2030, causing him to consider selling his portfolio prematurely.
- In light of faced challenges and dwindling profits, many landlords, including some like Harry Osborne, are seeking alternative investment avenues, such as mixed-use investments as a means to ensure a more stable return on investment, like Neil Murtaza Kinili's acquisition of a shop with a flat in Swansea with its reduced stamp duty and diversified rental streams.
