Strong demand from landlords has created a surge in buy-to-let mortgage lending, while emerging trends show how successful property investors are navigating the market.
Amid reports that some landlords are being put off the sector by increasing costs, taxes and regulations, delving deeper into new research reveals a different angle.
While conditions may be more difficult across the property market as a whole, with raised interest and mortgage rates, the cost of living crisis and high house prices all adding to buyers’ difficulties, agile property investors are adapting by adjusting their strategies.
The latest lending figures from Paragon Bank back this up, as their half-year results recently revealed a huge 25% increase in new buy-to-let loans, demonstrating the “underlying strength of demand in the buy-to-let market”.
In the six months to March 2025, Paragon recorded £812.2m in new buy-to-let mortgages, up from £649.3m for the same period last year. This brings the specialist lender’s total loan book to £13.7bn, with buy-to-let mortgages forming a significant part of this.
As the rental market continues to be affected by the mismatch between supply and demand, exacerbating competition among tenants and pushing up prices, the data points to the fact that investors remain keen to respond to this by boosting their portfolios.
Investor trends for 2025 and beyond
Being able to respond and adapt to market changes and tenant trends has always been important for successful property investment; but when conditions become more tricky, doing so can significantly affect the profits you can make.
This might involve branching out into new locations or property types, or choosing to target different tenants. Investors may also look at ways to enhance their current offering, to ensure their properties continue to attract as many tenants as possible.
Recent studies have revealed that tenants are increasingly paying more for sustainable features, while energy efficient properties have become even more desireable since utility bills began to skyrocket. As a result of this, investor interest in new-builds and eco-friendly homes has risen.
A surge in the number of landlords investing in property through a limited company has been another major shift in the sector in recent years, which has also led to a rise in the number of lenders offering products in this space.
Last month, a survey from Foundation Home Loans revealed that 60% of landlords are planning to use a limited company structure for investment properties they buy in the next year. Meanwhile, overall limited company ownership among property investors has nearly doubled in the past five years, rising from 36% in Q1 2020 to 66% in Q1 2025.
In general, larger portfolio landlords stand to benefit the most from investing in property in this way, but a growing number of smaller landlords are also opting for these structures due to the potential tax savings.
Another growing trend among buy-to-let investors is towards houses in multiple occupation (HMOs). Once seen as an unenticing, lower-quality option for renters who couldn’t afford anything better, HMOs have increasingly become a staple option for young professional tenants looking to live in sought-after locations.
According to Foundation Home Loans, one in five landlords now owns an HMO, with the sector proving to be “financially resilient”. Average rental yields for HMOs are currently 6.3%, says the lender, which is close to a 10-year high.
Diversifying is becoming the norm
Property investors have always used diversification as a way of both spreading their risk and potentially maximising their returns, so these trends are not surprising in the current landscape.
FHL’s director of sales, Grant Hendry, said: “Incorporation is no longer a niche strategy, it’s a mainstream structural approach, especially for landlords who are expanding or refinancing.
“The fact 60% of those planning to buy this year intend to do so through a limited company reflects how embedded this behaviour has become.”
He added: “Specialist property investment is also a major theme, and it is interesting to see that larger portfolio landlords are targeting areas such as holiday lets, more than doubling their holdings of these properties.
“Whether it’s holiday lets, HMOs or multi-unit blocks, landlords are clearly broadening their portfolios in ways that demands deeper product expertise and flexible criteria.”
For help diversifying your property portfolio, get in touch with BuyAssociation today, or browse some of our current property investment opportunities.
