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2022: what’s in store for the lettings market?

Letting   |   January 12, 2022   |   Joe Rocks

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As we move into 2022, numerous factors are set to influence the lettings market for better or worse.

To maintain peace of mind, we recommend landlords are aware of these and, if necessary, prepare accordingly.

First, let’s consider market trends. Any decision about starting or expanding a rental portfolio will depend on likely returns. So what we can say about rental prices? Do they signal that the rental market is a good place in which to invest?

The good news here is that rental price growth remains strong. In Portsmouth, the average rent has gone up by 5.3 per cent in the past year.

More widely, Zoopla reported that the third quarter of 2021 saw a 13-year high with average UK growth reaching 4.6 per cent.

The forecast is similarly upbeat with further price rises of between 2.5 and 4.5 per cent predicted during 2022.

In some areas, growth at the higher end will even exceed pre-pandemic levels.

Wherever the average is tipped to land, most commentators looking at the current balance of supply and demand agree that average market rents will rise in 2022.

Second, landlords should be aware of a raft of potential legislative changes enshrined in the government’s Renters’ Reform Bill.

A long-awaited white paper on the proposals is expected in the first half of the year having been put back due to the impact of the pandemic on parliamentary business.

Although the delay means any changes are unlikely to see the light of day until 2023, it is important to prepare early and that means staying up to speed with the bill’s progress this year.

One aspect that has gained recent attention is the potential removal of Section 21 of the Housing Act 1988, the right of so-called ‘no fault’ eviction.

There are many legitimate reasons why a landlord may seek to invoke the law in this area to take their property back.

Should the law strengthen tenants’ rights to the extent that Section 21 is removed, it is likely to be replaced with a more comprehensive interpretation of grounds for repossession, for example under the existing Section 8.

A key consideration for policymakers, and of course landlords and tenants, will be whether or not any new provisions should apply to existing tenancies or only new ones.

Whatever the outcome, our strong advice to landlords seeking eviction will remain that you must make sure all requirements and stages in the process are fully complied with.

There are lots of details to be mindful of, and if you don’t fulfil the letter of the law on each one, you could easily risk a costly and long-drawn-out legal nightmare before the tenant moves.

Another change that could see its way into reformed legislation is the introduction of lifetime deposits. There are many potential complexities here. While such a scheme would enable tenants to reduce the cost of moving between properties, there could easily be problems if a first landlord needed to deduct funds to, for example, compensate for property damage or outstanding rent, so leaving the second landlord in need of a top-up payment. Would a loan or insurance scheme help in that situation? Possibly, but we await the detail.

Another change in the reform bill that could well impact the market is the potential tightening of minimum energy efficiency standards. The expectation at the moment is that if you rent a new property to a new tenant from April of 2025, you will have to meet level C on your Energy Performance Certificate. That requirement is tipped to extend to all existing properties from 2028. In some cases, it’s quite a steep jump requiring considerable investment. Landlords of properties at or below the requisite efficiency levels now are well advised to begin putting money aside for capital improvements.

Among other changes envisaged in the government’s plans is the creation of a publicly available database of ‘rogue landlords’ who have been subject to banning orders. The government has already consulted on aspects of this but not published the outcome as yet.

For more information on the lettings market and how Chinneck Shaw can help you as a landlord, visit our ‘Let’ pages. You can also stay up to date by receiving our quarterly newsletter.

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