What Does 2022 Bring For Property Investors?

Hello readers,

We all made it through another year and what a year it was! We have had ongoing lockdowns, extensions to the stamp duty holiday, mandatory EICR regulations coming into force, extensions to the evictions ban, the axing of the Green Homes Grant, record property sales, record house price increases, increased interest rates and now the challenges brought about by the omicron variant.

About a year ago, when writing about my 2021 predictions, considered whether there would be a housing market crash and that’s been far from what’s happened! Looking back, I’m quite optimistic about how 2021 has panned out and think that 2022 will undoubtedly continue to bring with it some great opportunities. Here’s a couple of things to look out for.

3% – 5% House Price Growth

Ok, so house prices are not expected to increase at the same eye-watering rate that they have during the past 12 months, however, predictions are that they will rise anywhere between 3% (London) and 5% (outside London).

It will be interesting to look back at this when we get to the end of 2022 as according to the current data, the average terraced house in Medway costs £253,169 and this could rise by £12,658 to £265,827 if the 5% prediction rings true. 

If we look back over the past 12 months with the latest data from the Land Registry for terraced houses (reflecting October 2020 – October 2021), national house prices have increased by just over 8% (£17,484) and, for Medway, this has hit a whopping 12% (£27,467). This is a fantastic return for Medway property investors!

2.5% Rent Growth

Strong rental demand is expected to drive continued rental growth, with an average of 2.5% growth expected over the coming year. This means that, for example, a single let rented at £950 pcm would increase to just over £973.

For a single room, I anticipate that this increase would be similar, making a room that currently lets for say, £550 pcm achieving potentially just under £565 pcm.

For single lets, if we look back over the past 12 months, rents in the south east have risen by 6% from £1,065 in November 2020 to £1,129 in November 2021. Compared to the rest of the UK, this is slightly down on the national average increase of 8.6% from £974 in November 2020 to £1,058 in November 2021.

It is, however, important to remember that different areas such as the north have seen unprecedented increases and, for example, Northern Ireland has seen a rent increase of 14% this year!

Continued Strong Demand

Personally, I thought that there may be a downward trend as the stamp duty holiday ended, however, whilst this has happened to some degree it has not been quite as stark as I had expected.

There is, currently, still extremely high demand from buyers and it seems that properties are receiving record levels of interest, meaning they are selling (and letting) at record speeds.

Renters Reform Bill

This is one to watch! We have seen how the Renters Reform Bill white paper was delayed from the autumn to 2022, however, there is no set date by which it will be released. This paper may (or may not) be published this year, however, if it does, it will certainly be a significant one for property investors to look out for. Things it is expected to address include:

  • Lifetime Deposits
  • Scrapping section 21 evictions
  • A national landlord database
  • A right to redress

EPC Grade C Decision

I personally know that this is a significant concern by property investors and the delay to publishing a decision on any changes to EPC regulations is causing people to hold back from investing.

With time running out on the proposed date to mandate for all new tenancies to be an EPC Grade C or above by 2025 and the costs of achieving this being significant, I am significantly concerned about this policy.

I don’t know why the Government seems to think every property investor has gold-plated pockets. The risk of not providing adequate funding or support for this policy is that investors will begin to look elsewhere, further adding to the lack of rental housing available!

Hopefully 2022 will shed some more light on the proposals (and possibly even include a review of the EPC system which, in my opinion, is currently floored!).

Interest Rate Rises

We’ve seen the Bank of England increase the base rate by 0.15% to 0.25% already and I fully anticipate that there will be another rise when they next meet. The knock-on effect of this will be an increase to mortgage interest rates for those purchasing outside of a limited company.

In addition to this, it is likely to mean that, coupled with the current rate of inflation, EVERYTHING will begin to get even more expensive meaning margins will be squeezed, rents will need to increase and home ownership will just get further away for many.

Regulation Of Property Agents & Landlords

Whilst not yet finalised, Government proposals recommend that property agents be regulated with a requirement for professional qualifications in much the same way as a lawyer.

Following on from this being a requirement for property agents is likely to be the requirement for all individual landlords to meet similar requirements. Personally, I think it’s a good thing that standards are being raised.

I will be keeping my eye on this and let you know if there are any significant changes to be aware of!

Final Stage Of Mortgage Rate Relief Phased In

The 2021/22 tax year is the final year that landlords who own property outside of a limited company can claim tax relief when it comes to mortgage interest payments.

This change has driven a significant shift to investors purchasing through a limited company and, for example, led to there the period beginning 2016 and ending 2020 having more companies set up to hold buy-to-let properties than in the preceding 50 years combined!

Whilst it may be more tax-efficient to build up a portfolio within a limited company structure, this is not always the case, and I will be outlining this more in a subsequent article.

A Landscape Of Optimism

Us property investors tend to be a hardy, flexible bunch and very used to the winds of regulatory change. Whilst I think that 2022 will see property investors needing to stump up a significant amount more cash than even two years ago, there are a lot of reasons to be optimistic.

Property will continue to be a stable, reliable, long-term asset class and I fully anticipate that there will continue to be some great deals for the savvy investor. Yes, it may be harder to find decent investment properties, but they still exist.

Here’s to a profitable and positive 2022!


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