Landlords are enjoying improved net returns from buy-to-let properties despite a sharp rise in start-up costs and slowing capital appreciation, according to new research from Dwelly.
The analysis from the lettings acquisition company, which compares 2025 figures with those from 2024, found that the average cost of entering the buy-to-let market has risen by more than 60% in the past year, driven largely by higher Stamp Duty Land Tax (SDLT) on second homes.
Start-up costs now stand at £16,824, up from £10,302 last year – a rise of 63.3%. SDLT alone has jumped 76.9% to an average of £14,926, following recent reforms targeting second property purchases.
However, Dwelly’s research also shows that ongoing operating costs have fallen significantly, softening the impact of these higher entry costs.
FALLING INTEREST RATES
Average annual running costs have dropped by 24.6%, from £15,694 to £11,829. Much of this is due to falling mortgage interest rates, which have reduced financing costs by almost 40%, from £10,210 to £6,162.
While insurance costs and void periods have ticked up, maintenance and repair expenses have seen a modest decline.
Average rental income has risen 3.6% year-on-year to £15,684, although total buy-to-let income – which includes both rental yield and capital appreciation – has dipped by 6.6%, down from £29,901 to £27,923.
The drop is attributed to weaker house price growth, with average annual capital appreciation falling from £14,757 to £12,239.
Despite this, landlords are ending the year in a stronger financial position. After subtracting annual operating expenses from total income, the average landlord’s net return has risen to £16,093 – a 13.3% increase on last year’s figure of £14,206.
COMPLEX LANDSCAPE
Sam Humphreys, Head of M&A at Dwelly, says: “Today’s rental landscape is more complex, with higher up front costs and slower capital growth. But our research shows landlords are adapting well, supported by falling mortgage costs and a strong underlying rental market.
What matters most is the return, and it’s going up. That’s a strong sign that, even in a tougher market, well managed properties can still outperform.”
