As flipping properties becomes less and less profitable, more property investors are looking for opportunities in higher-yielding segments of the rental market for greater returns.
Brokers and lenders say they’ve seen their investor clients switch strategies from buy, renovate and sell to buy, let and hold as transaction and project costs spiral, house prices only show slight growth and taxes bite.
According to Hamptons’ latest analysis of property transactions, in the first half of 2025, 1.4% of homes were bought and sold within 12 months – the lowest proportion since 2013.
Softer conditions in the housing market since the mini Budget that sent interest rates rising and punitive taxes have caused more investors to ditch property flipping in favour of holding properties for longer, explains Kunal Mehta, managing director of bridging lender SDKA.
Buying properties to do up and sell on within 6-12 months in a market where house prices are rising is favourable, he adds, but investors are more nervous doing so in a market where they feel prices could fall.
Tomer Aboody, director of MT Finance, agrees that investors are holding on to properties for longer.
Mind the affordability gap
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He says: “From my understanding, there are quite a few investors still looking to hold rather than sell, potentially either in anticipation of a new government in a few years [that] is more investor-friendly, or looking at current market conditions and feeling that they won’t be maximising their capital appreciation currently.
“Flipping is definitely a lot more difficult at the moment, as the market is stagnant with very little capital appreciation.”
Punitive taxes
But changes to stamp duty thresholds, the increase in additional homes stamp duty and the reduction of capital gains tax (CGT) allowance have “exacerbated” the problem, adds Mehta.
Between 2020/21 and 2022/23, the allowance was £12,300, before being reduced to £6,000 and finally £3,000.
Stamp duty on additional properties, meanwhile, has increased from 3% to 5%, while thresholds for the bandings for residential properties reduced this April, culminating in much higher tax bills for investors.
“If an investor was to purchase a buy-to-let property for £500,000, the stamp duty would be £40,000. If the investor is then looking to refurb and flip, they’ve got to be making a significant margin to recover that level of stamp duty,” he says.
But, adds Mehta, there are “deals to be done” and clients are still taking advantage of plenty of opportunities.
To cater for the change in investors’ preference to hold properties for longer, the lender launched a bridge to term product last month. This allows borrowers to take out a bridging loan of up to 12 months and then when they meet certain criteria – such as receiving three months’ rent – the investor automatically transfers to a lower rate for up to 36 months.
Cost of transactions rockets
Guy Nyirenda, head of commercial and specialist lending at Altura Mortgage Finance, has witnessed the same trend.
“We’re seeing more investors than ever looking to hold on to properties,” he says.
Nyirenda says it is not only because of challenges in the market but the opportunities to achieve high rental returns in the lettings sector.
“Cost of materials and labour for building projects has gone up massively, so getting a level of profit out of [flipping] is difficult because the costs are so high.
“To make a decent profit, you need to add a large amount of additional square footage or make serious material changes to the property, which adds time to the project. This makes each project much less profitable than it once was.
“For that reason, we’re seeing an increase of investors and landlords trying to find other ways to increase their cash flow and returns,” he adds.
Short-term lets on the up
Those are either houses in multiple occupation (HMOs) or short-term lets, which have grown in popularity outside of the traditional holiday and coastal hotspots.
Short-term lets are increasingly popping up in town and city centres catering to visitors for concerts or events, particularly in London, who are looking for a one- or two-night stay, adds Nyirenda.
They are also popular with gig workers on short contracts or employers who need to work in the city for a month, for example, and don’t want to take out a longer lease.
“We’ve seen a big increase in short term lets and HMOs coming to market that lead to higher returns for investors.
“You might have a five-bed house let across different renters, some may want it for two weeks, or a month or two months. The yields are high and you’re letting out the whole property on a short-term basis, not your usual ASTs for six or 12 months,” he adds.