Here is what Every Buy-to-Let Landlord Should Expect in 2022
The increasingly expensive mortgages and more stringent regulations are quite a challenge when it comes to purchasing a home, so what’s in store for landlords this year?
2021 saw another increase in house prices, with increased rental costs and record-beating low-interest rates in tow, making it an excellent set of conditions for landlords across the UK. The average house price rose by £23,902 over the last year, with landlords selling properties ending up with large profits as a result. With demand exceeding the supply of rental properties, rental costs have been increasing in rates ever since for the last thirteen years. Even when the increased tax levies have been a factor, buy-to-let investors have seen a very successful year. There are some drawbacks to 2022, however, so you need to keep those in mind as the year unfolds.
With changes to regulations requiring landlords to make adjustments to make properties more eco-friendly, as well as the proposition to scrap no-fault evictions altogether.
House Prices are Stabilising
Since the pandemic started, house prices have been rising by an average of almost £34,00, being the highest growth since 2006. This ended up resulting in many landlords benefitting from the increase and making the decision to remortgage, sell or release equity. Despite the setbacks caused by the pandemic, the market has been improving and house prices are growing. This created great opportunities for investors, with their confidence in the market growing ever stronger over the last year. The buying activity and trends on the market show it will remain strong for the moment. That largely depends on whether or not demand will exceed supply as to whether the prices of housing will still keep rising in 2022. Many sellers are still waiting to see if they can find something they like that would sell on the market.
Without a catalogue of potential new homes, there is a high chance the realty market will become starved as the year progresses. House prices are expected to rise another 1% over the next year, according to Halifax, but both Savills and Hamptons are predicting a rise of about 3.5% on average.
Updated EPC Regulations
With more and more regulations and loopholes coming up for buyers to get through, it’s hardly a surprise that people are reluctant to invest. The EPC proposals mean that stricter regulations will be put in place and people will have to comply by a certain date.
Landlords will currently need to achieve a minimum rating of E on their energy performance certificate, as well as perform annual gas safety checks as part of operating their business. This increases to a required rating of C by 2025, so the government can attempt to achieve their goal of net-zero carbon emissions by 2050. Unsurprisingly changes to EPC regulation will be at the forefront of conversations in 2022. From 2025 on, all new lets, no matter the age or location of the property will need to have that C rating to stay in step with the government’s plans. This is supposed to be rolled out to existing tenancies, but rumours are flying around that the government may be planning to extend the deadline for new lets to 2026.
Increases in Mortgage Rates
Tax changes dealt additional blows to landlords over the last few years but were softened by the competitive and cheap mortgages available in such cases. With the expectations of rising interest rates in 2022, it may be possible that some landlords will opt to avoid investing as future profit margins will be down. The Bank of England increased the base rate from 0.1% to 0.25% and more rises are expected in the coming days.
