Is Buy to Let Still Worth It in Central London?

With the introduction of tax changes and new regulations to comply with, it is understandable that some existing and prospective landlords are wondering whether buy-to-let is still a worthwhile investment.

Despite the changing landscape, buy-to-let investments still offer one of the most profitable low-risk investment options. Long-term property investments can generate a good monthly rental income, while the potential for property value appreciation also makes BTL an attractive investment.

When deciding whether buy-to-let is still worth it in 2025, there are many factors to think about. Stamp duty surcharge increases are far from ideal and new legislation can be overwhelming. However, the high demand for rental properties in areas including Victoria and Notting Hill, where high rental income can be achieved, means that buy-to-lets can still generate a good return on investment.

Read on to find out how the buy-to-let market has changed and how to maximise the property investment opportunities in central London.

Why Do People Think Buy-To-Let Is Dead?

There has been a raft of changes impacting landlords over the last decade. Since 2016, a stamp duty surcharge has applied to second properties, and in April 2025, this surcharge increased from 3% to 5%.

Less tax relief

In 2017, the government introduced Section 24, incrementally reducing the tax relief on mortgage interest for landlords before replacing the relief with a 20% tax credit from 2020 onwards.

High mortgage interest rates

Another reason investors have been more cautious about buy-to-let is the higher than usual mortgage interest rates. The Bank of England base rate sat at 0.1% in December 2021 before consistently climbing up to a peak of 5.25% in August 2023, where it remained for almost 12 months.

Rates have been decreasing steadily throughout the second half of 2024 and the first half of 2025 (hitting 4.25% in June 2025) but landlords looking to take out BTL mortgages still face higher interest rates than they would have three or more years ago.

More legislation to follow

With the added complications of the Renters’ Rights Bill on the horizon, and the extra compliance responsibilities this will entail, there are understandable questions around whether BTL is still worthwhile. It is not all bad news though, as there are plenty of reasons to consider buy-to-let as an investment and it is still possible to achieve a good rental yield.

Aside from these broader, economic factors, some landlords are looking to sell their rental properties for simpler reasons – they may be looking to retire and do not want the hassle of managing a property, while others may want to avoid expensive landlord/tenant disputes which are a headache to deal with.

The Pros And Cons Of Buy-To-Let In 2025

Before you decide whether buy-to-let is the right option for you, here are some of the key pros and cons to consider:

Pros for buy-to-let investors

• Regular cash flow through rental income

Monthly rental income can be very good in high-demand areas. With comprehensive area research and intelligent financial management, high rental profits can be achieved.

• Capital growth

Capital growth is another financial benefit for landlords if the property increases in value over the ownership period. Typically, house prices trend upwards, even if there are fluctuations in the property market at certain periods. For example, the average property price in the Kensington and Chelsea local authority was £584,890 in 2005. In April 2025, the average property price in the same area was £1,345,813. While property values have been more volatile in recent years, as a long-term investment, it is likely that landlords can achieve significant capital growth.

• Rent inflation and high demand

The annual rent inflation recorded at the end of 2024 for London was 11.5%, with the high demand for properties allowing landlords to increase rents. With some landlords exiting the buy-to-let market, demand for rental properties remains very strong.

• Capital Gains Tax reduction

Although stamp duty and mortgage interest relief have negatively impacted buy-to-let investors, the government reduced Capital Gains Tax on second properties for higher rate taxpayers from 28% to 24% in April 2024. CGT for basic rate taxpayers is currently 18%.

• Interest-only mortgages

Taking out a buy-to-let mortgage with interest-only repayments can help to keep monthly mortgage payments down.

Cons for buy-to-let investors

• Stamp duty and other tax changes

Buying second properties now comes with a 5% surcharge on stamp duty which landlords will need to cover. The changes to mortgage relief have also meant that many landlords pay more tax compared to before the changes were introduced.

• New legislation and responsibilities

New legislation such as the upcoming Renters’ Rights Bill will bring some additional responsibilities for landlords. The core changes will improve tenants’ rights, and some landlords are concerned about the abolishment of no fault evictions. There will also be likely updates to EPC ratings for landlords in 2030, meaning extra money spent on upgrading your property’s energy efficiency, as well as substantial council tax costs for rental properties that lie empty.

However, landlords providing rental properties in good condition and who want reliable, long-term tenants may see little impact. Landlords using letting agents will also have expert support with compliance and adapting to any changes that affect them.

• Higher mortgage interest rates

Mortgage interest rates are higher than they were several years ago, but they have been sliding recently, with finance experts predicting further decreases over the next few years. You don’t want to be in a position where you can’t pay your mortgage, so make choose deals and lenders carefully.

Opportunities For BTL Investors In Central London

Investors looking to buy rental properties in central London can benefit from the following opportunities:

• Attracting high-end tenants

Central London properties have higher than average prices but the allure of living in prestigious areas with close proximity to luxurious amenities ensures that there is no shortage of interest from high-end tenants. Provided that you have the upfront funds for a deposit and stamp duty, rents of £4,000 pcm and above in Kensington prove that there is a potential for a very good rental income.

• Demand from corporate professionals

A significant proportion of the highest earning professionals in the UK live, or want to live, in prime locations in central London. This means there is greater tenant affordability for high-end properties with higher rent.

• Luxury student accommodation

While many investors in student accommodation have traditionally focused on renting out lower value properties with basic amenities, there has been a growing demand for luxury student accommodation in central London.

An increase in the number of international students, many of whom have affluent backgrounds, has seen a surge in students looking for high quality accommodation in central locations close to the London universities and colleges.

Strategies For Success As A Landlord In 2025

There are many challenges for landlords in 2025, but with the right strategies in place, you can enjoy excellent financial rewards. These are some of the key strategies to master:

Regulatory compliance

You will need to spend time learning about landlord regulations and develop tools such as calendars to ensure tasks and deadlines are met. You will also need to stay up to date by reading the latest updates on legislation changes.

Alternatively, you can use an experienced property management/letting service to handle the bulk of the compliance work for you.

Flexibility

Be prepared to change your property strategy if your current approach is not as successful as it should be. You can consider renting out different types of properties, such as HMOs or holiday lets to generate higher rents if you need to in future.

Focus on long-term tenants

While short-term rentals can be profitable, if you want to avoid the work and costs of a high tenant turnover, attracting long-term tenants will help provide a more consistent rental income. Building relationships with your tenants and finding out more about their plans will help you to find tenants who are more likely to want to settle in your property. Staying on top of maintenance and keeping your rent in line with the local market will also increase the chance of longer tenancies.

Is Buy-To-Let Still Worth It?

While the changes to taxes and stricter legislation in the private rented sector can pose challenges to landlords, buy-to-let can still be a great investment option but it requires efficient property management and excellent knowledge of the local rental market.

Investing in buy-to-let properties in central London properties in areas such as Marylebone and Soho, provides the potential for long term value appreciation, combined with a higher rental income as a result of high demand and low supply in these areas.

If you are considering investing in buy-to-let property, we can support every aspect of managing your rental property, from finding the right type of tenants, to staying compliant with all the relevant regulations. Contact our team to find out more about our services.