Nothing is predictable in the current climate it seems, but there are certainly forecasts for the UK property sector that look like a safe bet for the year ahead.
Over the past 12 months, despite many gloomy prospects at the start of the year, the country’s real estate market has remained remarkably resilient. While UK property sales have been boosted by the stamp duty break, appetite for the sector remains strong nonetheless. For property owners and investors alike, bricks and mortar have remained one of the most attractive places to invest compared to other avenues.
As the year draws to a close, real estate services firm’s Kevin Shaw and Michael Cook Romans Group Leaders (LRG), have come up with their own set of probable outcomes for 2022. From the rental market to the housing market’s links to economic performance, the overall outlook for the pair is optimistic.
UK property will continue to climb
The group estimates that UK house prices will continue to rise in 2022, with an increase of around 3% on the year. This will be accompanied, according to them, by a growth in rents which should also reach 3% on average. However, in some of the better performing areas, rental growth could even reach 5-10%.
This could be partly due to a growing gap between demand and available stocks. Some private rental sector landlords may have already sold, or are considering selling, to take advantage of rising house prices.
As always, in the UK property market location makes a big difference and some areas are expected to prosper more than others.
The best locations for the growth of the housing sector
According to Kevin Shaw and Michael Cook, the North West, East Anglia and Essex could be the ones to watch next year. These locations all offer “more for your money,” which means they’ll perform well in a climate where people are looking for more space after foreclosure.
They add: “Likewise, investors who buy in the Midlands and the North benefit from preferable mortgage deals with better loan-to-value ratios, improving yield and monthly returns on investment. It is for this reason (despite historically strong equity growth in the south), buy-to-lease activity has been stronger in northern cities in 2021 and we expect this to continue in 2022. “
The rental construction boom will continue
The country’s rental market remains an essential part of the UK property sector. More than ever, however, people are seeing renting as a long-term option and are looking for places that offer little more than a standard buy-let.
The LRG pair believe the rental construction boom will branch out in 2022 to encompass single-family and single-family homes as well. Currently, rental construction is often aimed at multi-family apartments with a few common facilities.
LRG adds: “This is expected to expand next year with real estate heavyweights, such as Lloyd’s and John Lewis & Partners, diversifying some of their portfolios from commercial property to residential rental properties, sending a signal to owners is the strength of the industry. But the market needs a much larger supply of units in the construction cycle to meet demand, and now is the perfect time to invest in construction for lease.
Tenant reform bill could enter
The Tenant Reform Bill, which was first introduced in 2019 and includes proposals to ban “no-fault” evictions under section 21, may come into force in the near future. The publication of the white paper is currently scheduled for 2022. The bill could also see the introduction of lifetime deposits for tenants.
Homeowners are advised to familiarize themselves with this bill and start preparing for it. It could seek to make the rental market “safer and less sensitive to unscrupulous landlords,” say Kevin Shaw and Michael Cook.
Section 21 evictions, where a landlord can ask a tenant to leave for no “reason”, have been controversial for years, and the move could trigger a big change in the industry.