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Property Market Trends and Legislation Changes We Predict For 2022

March 24, 2022

With the pandemic rolling on and the Brexit transition continuing, 2021 has been yet another year full of hurdles. However the property sector has managed to continually overcome these, and we’ve seen the average number of UK sales this year increase by over 30%, with average rents across the UK up by 5% year on year (excluding London).

To try and make sense of the property market in the year ahead, we’ve put together our trend predictions, as well as the legislation we anticipate will change, for 2022.

Rent and house prices will increase

In terms of rent, there has already been a bounce back to pre-Covid levels in cities. But we’ll likely see a rise in rent prices primarily because of a supply gap. We predict that there will be a 3% rise in rent across the country and that could even reach up to 5-10% in some high-growth areas.

Areas for growth

The Northwest, Midlands, East Anglia, and Essex are likely to see higher than average growth for rent and house prices in 2022. Areas where people can fulfil their desire to have more space following the lockdown-inspired surge to suburbs will continue to increase in popularity.

Likewise, investors purchasing in the Midlands and North are benefiting from preferable mortgage deals with better loan to value ratios, improving yield and monthly cash returns on investment. It’s because of this (despite historically strong equity growth in the south), buy-to-let activity has been more prominent in the Northern towns in 2021 and we expect this to continue in 2022.

Despite businesses starting to return to offices, many employers are still working to hybrid models, and this opens more buying options outside of traditional high employment areas such as major cities and commuter towns.

Possible increase in mortgage rates

Recently the Bank of England raised its base rate from 0.1% to 0.25%. This is still a very low rate, however as these rates are usually used to keep inflation in check, we may see further increases in 2022.

More attractive mortgage rates for energy efficient properties

As the Government continues to set out ever-firmer plans for reducing carbon emissions, the energy efficiency of properties is coming more and more into focus. The Bank of England is starting to subject UK banks and insurers to ‘climate-related stress tests’ and there are proposals that lenders may soon have to provide information on the energy efficiency of the properties they hold mortgages on.

In response, some lenders have already started to offer ‘green mortgages’, with more attractive deals for properties rated ‘C’ or above on the EPC, with homes rated ‘A’ getting the very best deals.

Minimum EPC rating rising to C

For England and Wales, current Government proposals are for a minimum ‘C’ rating to be introduced for rental properties - in 2025 for new tenancies and in 2028 for existing tenancies. As such, we would suggest that if your property is currently rated lower than ‘C’ you start looking into what improvements could be made to improve that, so you’re well prepared.

Investing in your property is never money down the drain and the initial capital investment into a greener home will improve its value, make it more appealing to tenants and make future rent increases more sustainable with the pressure off the day-to-day energy bills of tenants. And of course – it’s all tax-deductible. As mentioned above you could get more attractive buy-to-let mortgage rates too.

Deposit replacement schemes will grow

Our no-deposit ‘The Residency’ scheme was ground-breaking when it was implemented in 2018. With living costs on the rise, being able to move without a large amount of savings for a deposit makes it easier for tenants to find a property where there is less stock on the market. We’re typically seeing one in two new tendencies choose to take the no-deposit option, and we only anticipate demand will grow.

Renters’ Reform white paper to be published

At the end of October, the Department for Levelling Up, Housing and Communities announced that the long-awaited white paper on rental reform has been delayed until 2022.

The Renters’ Reform Bill has been in the works for a few years now. It’s intended to be the biggest shake up of the private rented sector for a generation, with proposed changes including:

The scrapping of Section 21 ‘no fault’ evictions and reform of Section 8 notices

Mandatory redress scheme membership for landlords and the introduction of a landlord register

The introduction of ‘lifetime’ deposits, which would transfer from one landlord to another.

So, although we’ve been anticipating these changes for a while now, it looks as though 2022 might be the year when some specific legislation could be passed.

From our perspective, increased accountability for landlords is a positive step and should further improve standards in the industry. And if you’re concerned about the abolition of Section 21, the lettings industry is working hard to ensure that the reform of Section 8 will include expanding the grounds for possession and improving the eviction court process, so that landlords are still able to regain possession of their properties when they need to.

Zero ground rent for new and extended leases

While there’s no firm date yet for this to come into force, the Leasehold Reform Bill passed through the Commons unopposed at the end of November and is now in the Committee Stage. Assuming it continues to move forward with little or no opposition, it’s likely to become law in early 2022.

Under the Bill, developers of new properties can only charge a ‘peppercorn’ rent – which is effectively zero – and the same will apply to anyone extending their lease under the statutory route, as long as they’ve owned the property for at least two years.

While this is great news for landlords making new leasehold investments or thinking of extending a current lease, existing leasehold property owners will be hoping that the legislation will be extended to all ground rents in the near future.

No more changes to Capital Gains Tax

The one thing landlords don’t need to worry about any more is the possibility of Capital Gains Tax. In November 2020, the Office of Tax Simplification completed a review of CGT and made a number of recommendations to the Government. The first of these recommended changes was introduced by Rishi Sunak in his Autumn Budget, with the window for property owners to report capital gains and pay any tax due being extended from 30 to 60 days.

Two other key recommendations were that CGT rates should be brought more in line with income tax rates and the CGT tax-free allowance cut significantly, which would have had a hugely negative impact on property investors, particularly higher rate tax payers. But the Treasury has just rejected these two proposals and made it clear they’re unlikely to be implemented in the near future, which is great news for landlords.

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