Five predictions to help buy-to-let investors in 2022

Male Realtor Showing Female Client Around House

Low supply is creating a real opportunity for potential buy-to-let investors - particularly long-term - Credit: Getty Images/iStockphoto

A new year, and one which I think all of us are hoping will mark the return to normality in many areas of our lives. Despite the ongoing pandemic, it does feel as though we can all finally start to make some long-term plans for a future which isn’t dominated by the virus.

Some normality in the residential lettings market would certainly be welcome. Lockdown made many people realise they wanted something different from their home, and the period after each lockdown saw a massive demand for rented properties, far outstripping the limited supply of homes.

To let sign on fence outside house

The lettings market is still experiencing problems with supply - Credit: Getty Images/iStockphoto

That demand is settling down a little now, but the supply issue remains very current. For buy-to-let investors, and potential investors, this presents a real opportunity for long-term investment prospects.

The past few years may not have felt like a great time to be a residential landlord, with government measures repeatedly nibbling away at the sector. Increased taxes, ever-tighter energy-efficiency regulations, the move to abolish Section 21 evictions – all of these have led to some landlords deciding to leave the sector, and others downsizing their portfolios. Which is why we are left with a situation where there are multiple potential tenants for every property offered for rent.

Mortgage and loan approved concept: house on a coin pile. planning savings money of coins to buy a

An initial stamp duty charge pales in comparison to rental yields over a five or ten-year period - Credit: Getty Images/iStockphoto

However, this very process is rebalancing the market and presenting opportunities for landlords. The mismatch between supply and demand is driving up rent levels, and the continued strength of the housing market means that the potential for capital growth is strong as well.

The key here is that the best opportunities are long-term. A 3% stamp duty charge is onerous if you look at it over one year, but take that over five or ten years, and it pales into insignificance against the potential rental and capital yields.

A portrait of happy young family with a toddler girl moving in new home.

Tenants will continue to want more space in 2022 - Credit: Getty Images/iStockphoto

For those seeking to invest in buy-to-let, here are my predictions for 2022 which might be useful in deciding which kind of property to buy.

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  • Energy-efficiency will be very important. With a stricter EPC limit on the horizon, not to mention swingeing energy price increases, tenants will be seeking homes which are cheap to heat. Expect to see older, less efficient properties sold off and investors drawn to newer, energy-efficient properties.
  • Tenants still want more space. This means somewhere inside the property to work from home, and access to outside space, too.
  • Quality broadband is increasingly important. Especially outside the city, locations where there is a good connection will be more in demand than broadband (and 4G) ‘not-spots’.
  • People want easy access both to work, and to leisure (which means the coast and the countryside). Location is as important as ever.
  • There is a strong market for top-end properties, especially city apartments. People will increasingly pay for quality, and are less likely to put up with sub-standard accommodation. The professional and family markets will be strong throughout 2022.

Phil Cooper is lettings partner at Arnolds Keys,

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