People searching for rental properties up 76%
“Pressures on the buy-to-let market in 2022 will be like the fabled push-me-pull-you from Dr Doolittle – pulling in both directions,” according to Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA).
Zoopla recently reported that the number of people searching for a rental property was 76% higher in the New Year than during the same time between 2018 and 2021.
Broadhead believes this may be driven by younger people leaving their parents’ home post pandemic and striking back out into UK cities.
During the height of the pandemic many younger adults finished their housing tenancies across UK cities and decided to move back in with mum and dad, as many offices were shut down across the country.
In addition, with the possibility of companies having to let staff go, or placing them on furlough, a lot of young adults figured the safe option was to move back in with their parents.
With Prime Minister Boris Johnson removing all COVID related restrictions on February 24, meaning people who test positive no longer have to isolate by law, and free lateral flow tests set to end from April 01, this has meant a return to the office for some.
Broadhead went on to say that the desire to return to the cities for young adults is likely to continue.
“Supply, demand and rental yields are in the landlord’s favour right now,” he added. However, he believes other economic factors could dampen activity as the year progresses.
“The rising costs of living can only exacerbate affordability pressures for tenants and may limit potential rent rises for landlords,” said Broadhead.
Other factors for landlords reviewing their existing portfolio include the tax bite, as well as both the stamp duty surcharge and the removal of tax relief.
Looking to the rising cost of living, according to OFGEM, from April 2022, the energy cap, which is currently at £1,277 a year, will be increased. Those on default tariffs paying by direct debit will see an average increase of £693, from £1,277 to £1,971 per year, and prepayment customers will see an average increase of £708, from £1,309 to £2,017.
Read more: Cost of living inflation and mortgages – what is the impact?
In addition to this, national insurance contributions for the employed and self-employed are set to rise by 1.25% to fund social care.
This is also on top of inflation - the January 2022 CPI figure was 5.5%, up from 5.4% in December.
“The increase in house prices may give pause for thought on whether now is a good time to extend a portfolio, as is the requirement for landlords to improve the energy efficiency of properties with a lower EPC rating,” said Broadhead.
Landlords with less energy-efficient buy-to-let properties will be required to achieve an EPC rating of ‘C’ or higher for new tenancies by 2025, and for existing tenancies by 2028.
“Set against this on the supply side, while interest rates are rising – and this will continue as the Bank of England battles inflation – buy-to-let mortgages remain readily available,” he added.
There are currently 3,266 buy-to-let mortgages on Moneyfacts. Taken together, Broadhead said he can see remortgage activity in the buy-to-let space staying strong with new lending becoming more subdued during the year.
Amid the financial difficulties facing many, brought about by the pandemic, rising numbers of adults are looking to the rental market as a way to boost their income over this period.
Around 17% of the adult population in the UK, equivalent to 10 million people, have considered becoming a holiday let landlord, new research from Suffolk Building Society has revealed.
Read more: How many UK adults want to be holiday let landlords?
The past two years have seen a resurgence in UK holidays, and factors like travel restrictions, increasing flight prices, and a growing awareness of climate change have made staycations even more popular.
Rental properties can be highly profitable, as evidenced by data collected by Rightmove which showed that average rents outside London are up 9.9% to a record £1,068 per calendar month, and rental prices inside London have risen by 10.9% to £2,142 per month.
