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Rental market

03/02/2022

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We know many people who buy at our auctions are landlords, so we, at Phillip Arnold, thought you might appreciate a run-down of how the rental market has been performing across the UK and what may be in store for it in 2022.

At the beginning of last year, the various experts were pretty accurate with their rental market predictions, expecting it to be a busy year with rents rising between 5% and 8% and ongoing supply shortages. However, when 2021 kicked off, the exodus to the country was still in full flow and the rental market was running at two very different speeds. In towns and cities, rents were falling and there was an oversupply of properties. Outside of those areas, the opposite was happening – prices were rising, and there were stock shortages. At the same time, a number of landlords were taking advantage of the SDLT holiday to sell off some of their portfolios.

By spring, there were real signs of an improvement in demand in urban areas and rents there began to rise, albeit far more slowly than elsewhere. Then, in May, much to landlords’ relief, the eviction ban was finally lifted. There followed an avalanche of evictions and huge court backlogs that are yet to be cleared.

Summer came, the rental market moved into one of its busiest periods of the year and average rents hit an all-time high of £1,007. In London, the recovery continued, with rents up 1.5% year on year.

By the time autumn arrived, the market was booming in all areas – average rents were up 8.6% from 2020 and demand was surging in towns and cities as our return to work accelerated. Supply, though, was proving an issue and high demand ensured properties were being snapped up in an average of just 17 days.

As 2021 was drawing to a close, the average rent had reached £1,058, up 8.3% on an annual basis and by an impressive 12.6% in Greater London (£1,752) – (all figures: Homelet rental index).

This year, most experts are predicting more of the same, with continuing high levels of demand and even more severe stock shortages.

Commenting on the latest data, Andy Halstead, HomeLet & Let Alliance Chief Executive Officer, says

“If demand continues to outstrip supply, then prices can only go up. Typically, we might see a rise in rental prices for desirable or emerging areas, but high demand has been seen for some time now, and that applies to practically every area of the UK. With fewer new properties coming up to rent when compared to pre-pandemic levels, we can expect the trends we see continuing throughout 2022.”

There are some important developments expected in the rental market in 2022. With rising energy costs there will, no doubt, be an increasing focus on the energy efficiency of rental stock, especially when tenants are choosing a new home. In addition, the requirement for an EPC rating of C or above for new tenancies in 2025 means many landlords will begin making efficiency improvements now. The government is also due to release the details of its Renters’ Reform Bill this year, which is likely to include:

  • Section 21 being removed from the Housing Act 1988 and replaced with a more comprehensive Section 8
  • The introduction of lifetime deposits for tenants to help reduce the cost of moving between rental properties
  • Making the database of rogue landlords and letting agents accessible to the public

The changes are only likely to be implemented in 2023, but the idea is to give landlords as much warning as possible.

If you are thinking of investing in a rental property in 2022, why not take a look at the properties that are coming up in our next auction.