The last two years have been tough – but there are many reasons for residential landlords to be optimistic about The UK rental market in 2022.
When it comes to monthly payments, renting is now cheaper than buying – and partly because of this, demand for rental properties is high. As prospective buyers struggle to afford mortgages, more and more of them are making the decision to rent. The average age at which people buy their first home is rising, and increased geographical mobility is causing people to forego buying altogether or to test out living in an area by renting before committing to buy.
However, the rental sector faces major supply and demand challenges. Many landlords have recently chosen to sell properties – some to cash in on capital gains, some due to the tax changes and new rules imposed by the government (including looming new energy efficiency requirements – see below), and some to recoup losses due to COVID-19.
The National Residential Landlords Association has found that between March 2020 and September 2021, 23 per cent of private landlords lost rent due to the impact of Covid. Reasons for this included rental reductions negotiated with tenants due to the pandemic, agreements to temporarily suspend rental payments, and serious problems with tenants missing payments.
As a result, there is not enough supply to keep up with demand, competition for rental properties is at record levels and rental prices are rising. This puts landlords in a strong position to increase their income – and we expect rental prices to continue to increase this year. Invest in the right area and set your price right, and you can expect strong returns.
There are, however, certain expenses that look set to increase for landlords. The Government’s drive for Energy Performance Certificates is placing pressure on landlords to spend money to improve the energy performance of their properties. As of April 1 2022, a property cannot be legally let unless it has an EPC rating of E or higher – and the Government has proposed that by 2025 properties should be required to have an EPC rating of C or above. From 2025, it will raise the penalty for not having a valid EPC from £5000 to £30,000.
What does all this mean for the future of the The UK rental market in 2022? While we have seen landlords hit by COVID-19, the future is brighter, with further lockdowns, furlough and covid-related redundancies looking less and less likely. This means landlords should be able to feel more secure about their income – and rising rental prices offer the opportunity to recoup some of the money lost during the pandemic.
There is no doubt that governmental rule changes such as the looking new EPC requirements could prove costly for landlords, but with several years before these come into force there is the opportunity to spread the cost of making improvements to properties.
Need help with The UK rental market in 2022?
By placing your property with a rental agency such as Morgan Jones, you’ll benefit from expert advice on all aspects of being a landlord, and from our keen understanding of the market, which enables us to secure the best possible prices for your properties.
Get in touch today to find out more.