Rental trends for property owners in 2022
Life is slowly getting back to normal, or so we hope, which begs the question; What does this mean for property owners and their tenants? What trends can you expect in the coming 12 months? We’ll explore this, and more, in this guide to the 2022 rental trends for property owners.
- Will property prices increase or decrease?
- Will the cost of rent rise with soaring living expenses? Can tenants afford to pay?
- Changes to supply and demand
- Is 2022 a good year to invest?
- Property Insurance – Which is right for you?
1. Will property prices increase or decrease?
This is an important consideration for every investor, as it will determine how they manage their portfolio. In 2021 alone, house prices rose by over 10%, and these prices are predicted to rise by another 5% over the next 12 months.
This is due to the market beginning to move once more, as more students are able to return to university, international students are returning, and more people looking to move. However, despite this demand, there is a lack of homes available for purchase. This is what is causing the current surge in prices.
In short, although the market may slow later in the year, the general consensus is that prices will continue to rise. Especially if the current pressures on supply continue.
2. Will the cost of rent rise with soaring living expenses? Can tenants afford to pay?
Property prices aren’t the only thing on the rise, however. Due to the competitive market, UK Landlords saw rental price growth reach its highest level for 13 years last year. This is being driven by high demand and a lack of properties available for those looking.
This is great for Landlords but it puts even more pressure on current tenants. National insurance is set to increase by 1.25%, and energy bills are set to increase as well due to a number of factors. All this means that the general cost of living for tenants is soaring, in fact, the cost of living surged by 5.1% in 2021, the highest increase in 10 years. Rising rent, increased taxes, and more expensive bills equate to a loss in income.
This pressure could lead to financial pressure on tenants, putting them in a position where they may not be able to afford their rent. As a landlord, this leaves you vulnerable to a loss of cash flow, and issues paying your own debts – such as your mortgage or any other loans.
In these unfortunate events, you need to ensure that your income is protected. This is why having the right insurance is vital, especially in the current climate. The sudden end to tenancies, damage to your property, and long-term vacancies are all a possibility that will lead to a loss of rent. Comprehensive loss of rent insurance, however, will ensure that you’re covered for these unpredictable events.
3. Changes to supply and demand
There is still uncertainty as to whether the current supply and demand issues will change. Currently, there is not enough property available in the market for renters looking to move. The supply of rental properties was recorded at 43 per cent below its five-year average last year.
As lockdown restrictions ease, people are becoming more mobile. Landlords, however, have slowed their activity. Many have sold their properties to combat the losses they encountered over the pandemic.
Demand is currently high in rural and coastal areas, as people looked for space during the pandemic. This resulted in a dip in demand in cities. These figures are recovering once again though, as people are looking to move into cities across the UK once more.
4. Is 2022 a good year to invest?
2022 does present a great opportunity for those looking to invest in property. Current predictions indicate that property prices could rise as much as 3.5% this year, and that number could reach around 21.5% by 2025. Certain cities have capitalised on the lockdown and used these quieter periods to undergo expansion. This, coupled with the growing numbers of people returning to these cities, spells good news for investors.
The higher asking price of a property will present an initial hurdle, but the long-term capital gains are certainly enticing for those looking to make the leap. Plus, rising rents and increased demand may allow new and existing landlords to ask for higher rent than they would have otherwise.
5. Property insurance – which is right for you?
In the excitement of growing your portfolio and seeing potential gains, it’s important not to forget to protect your assets. As we’ve already touched on, there are a number of risks when letting a property, whether it be a commercial or residential property.
For commercial landlords, your needs will vary depending on the nature of your property. A small boutique shop will have different needs to that of a large industrial warehouse, for example. No matter the property type, we can tailor an insurance package to perfectly cover you in case of the worst.
For residential landlords, their needs differ further. Problematic tenants, loss of rent, and natural disasters, all present a risk to your income and your asset. We can help find the perfect cover that will allow you to rest easy, knowing that you’re protected.
2022 presents a remarkable opportunity for landlords, especially in the rental market. Whether you choose to grow, maintain, or reduce your portfolio, keep an eye out for these trends and how they could impact your bottom line.