Rental market predictions 2022 for landlords

As many landlords continue to feel the long-term impact of the Covid-19 pandemic, what could the rental market look like in 2022?

Read on for our predictions, from investment plans and rising prices to rental reforms and energy efficiency challenges.

1. Will landlords buy or sell property in 2022?

When you’re planning for the next 12 months, one of the biggest decisions you’ll make is whether to expand your portfolio, reduce it, or keep it the same.

The Simply business Covid-19 impact report found that just seven per cent of landlords plan to expand their portfolio in the coming months. Over a fifth (21 per cent) told us they’re planning to sell a property to make up for lost income caused by the pandemic.

That said, market conditions are set to be favourable with rental prices rising and demand in urban areas increasing.

2. Will rental prices keep on rising?

A combination of high demand and landlords exiting the buy-to-let sector pushed rental price growth to a 13-year high during Q3 2021.

Zoopla reported that rental growth across the UK reached 4.6 per cent between July and September, with particularly strong markets in the South West, Wales, and the East Midlands.

But will prices continue rising in 2022 or have we reached an upper limit? Here’s an overview of Zoopla’s rental market predictions:

  • average rental prices across the country could rise by another 4.5 per cent

  • growth in London is forecast to reach 3.5 per cent, exceeding pre-pandemic levels

  • rents could rise above earnings in areas of the country where it’s cheaper to rent

Offering an alternative view, letting agency Hamptons predicts that rental growth will slow in 2022. It has forecasted average growth of 2.5 per cent over the next 12 months.

Despite variations, most experts agree that an imbalance of supply and demand will continue to fuel rental growth in 2022.

3. Plans for rental reforms are set to be revealed

The government’s plans to make widespread changes to the rental market, known as the Renters’ Reform Bill, have been delayed.

The long-awaited white paper is expected in the first few months of 2022, with changes unlikely to be introduced before 2023.

However, due to the significant impact of the proposed changes, it’s important for landlords to start preparing and to keep up to date with the progress of the Bill.

Here’s a recap of the measures that could be announced:

  • removing Section 21 from the Housing Act 1988 and replacing it with a more comprehensive Section 8

  • introducing lifetime deposits for tenants to reduce the cost of moving between rental properties

  • making the database of rogue landlords and letting agents accessible to the public to increase transparency

Read our recent update for full details and keep an eye out for further updates on our Knowledge centre.

4. Could ‘lets with pets’ become the norm?

Due to the pandemic and longer average tenancies, the number of tenants who want to keep pets has been rising rapidly.

In August 2021, Rightmove revealed that tenant demand for pet-friendly homes was 120 per cent higher in July 2021 compared to the same month in 2020.

Despite the rising demand for properties that allow pets, it’s previously been reported by the government that only seven per cent of landlords are pet-friendly.

So, what could happen in 2022? Tenant demand for pets looks set to remain high and there could be more attempts by politicians to make it mandatory for landlords to allow pets.

Although there are clear risks, landlords who accept tenants with pets could benefit from a wider pool of potential renters. There’s also a higher chance of tenants staying in the property for longer and treating it as their own if they’re allowed pets.

If landlords have a comprehensive referencing process and the right insurance in place, they can reduce some of the risks.

5. Preparing for energy efficiency changes

Some landlords are concerned about the government’s plans to increase the minimum energy efficiency standard of rental properties.

Since April 2020, it’s been illegal for landlords to let properties with an Energy Performance Rating (EPC) of F or G unless they have an exemption.

From 2025, the minimum standard will be increased to C for new tenancies. This wiil be extended to existing tenancies from 2028.

Government estimates suggest that over three million rental properties currently have an EPC rating of D or below. As a result, many landlords will need to start working on improving their energy efficiency ratings in 2022.

One of the steps landlords can take to improve energy efficiency is to replace gas boilers with a heat pump. As part of the Autumn Budget, the government announced that from April 2022 landlords will be able to access grants of £5,000 to pay for heat pumps.

6. Carbon monoxide detector rule changes

In late November, the government announced that the rules around carbon monoxide detectors in rental properties will be extended.

Currently, landlords are required to install a carbon monoxide detector in any room containing a ‘solid fuel burning appliance’, such as a coal fire or wood burning stove.

The new rules will require landlords to install carbon monoxide detectors in all properties with fixed appliances such as gas boilers or fires.

Carbon monoxide detectors will also need to be fitted when new appliances such as gas boilers or fires are installed in any home, while landlords will be expected to test the detectors on the first day of a new tenancy.

The extended rules are likely to be introduced in 2022. We'll keep you updated.

7. What else do landlords need to look out for?

In what looks set to be a busy 12 months for the rental market, here’s an overview of what else could affect landlords in 2022:

  • more landlord licensing schemes and increased enforcement of existing ones

  • higher interest rates that could push up buy-to-let mortgage costs

  • a government clampdown on short-term lets, starting in Scotland

  • a rise in the number of mortgage lenders offering green mortgages to landlords

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Article by Simply Business