The dusk of 2021 is upon us and, as is customary in property circles at this juncture, we look forward to the new year ahead and forecast what we believe it will shape up to be.
This is no ordinary task in ordinary times, let alone currently. Many an expert predicts where house prices are going to land 12 months hence – and most seem to get it spectacularly wrong.
This year though, the prospect of predicting anything at all really is fraught with difficulty given the collision of circumstances that the country and the world face. In fact, the old saying that a week is a long time in politics (and therefore with all the resulting consequences) has been usurped by a 24-hour news cycle whereby government policy, economic prospects, covid variants and the media’s focus, change literally overnight. One dares not go to bed too early these days or to wake up late for fear that you may miss a lockdown, an interest rate hike, a Whitehall u-turn or a Prime Minister’s aid’s resignation that may affect us all in some hugely meaningful way.
But, all that said, readers of this publication rather expect us property pros to carry on regardless and so it is that the esteemed editor of Landlord Today has issued his instructions to us underlings…
So, 2022. How’s it going to pan out for landlords?
Previous readers of this column will know that I am an optimist. I believe in the basic soundness of foundation that UK property investment and rental returns provide despite the ups and downs that are thrown at us from time to time. I must admit to having the inside track here though in that I am myself a landlord and deal with tenants regularly, but I am also at the coalface daily as director of a decent sized London estate and lettings business and I speak to landlords and renters from around the world personally every day.
What this insight tells me is that the UK and London in particular are coveted destinations for property investment. The market may be cyclical (which market isn’t?) but if you take a view over past decades, it’s a market that performs well both in yield terms and where capital appreciation is concerned.
This is not going to change and let me explain why this coming year will reinforce my view.
- Demand amongst renters remains strong and rental values have risen, even in London. Across the UK as a whole, rents are up by about 11% despite the pandemic and perhaps even because of it.
- Over 20% of UK households are single occupier. This percentage is growing.
- People are living longer than ever before.
- House prices continue to rise and with the very latest Halifax HPI reporting another 1% month on month increase. This is not just good news for landlords but also creates a further obstacle for those looking to buy – thereby pushing householders further towards renting.
- Overseas buyers had evaporated due to Covid restrictions, especially travel related. As this drought unwinds you will see demand from overseas tenants, thousands of students amongst them, and from landlord buyers increase significantly. This will put further strain on rental and sales stocks and create an even greater imbalance in demand versus supply.
- BNO visa holders will continue to be encouraged to live in the UK. Hong Kong residents have the right to live, work, study and rent here
- Covid – a bold prediction here against a backdrop pf potentially more stringent restrictions being considered as I write this, however Covid fears will subside in 2022 - even Bill Gates says so and he’d know, right? ;-)
- If push comes to shove again, expect to see government support and subsidy as we saw in 2020 in order to keep businesses and the economy above water.
-New housing completions will suffer as labour and materials become scarcer still and more expensive – thus restricting supply of buy to let and build to rent stock.
On the negative side we will see more policy pressure on landlords and in the form of environmental credentials coming to the fore and of course, the lingering spectre of Section 21 being withdrawn. CGT changes remain a threat albeit only applicable if you sell, of course. Yet, to my mind, these are mere inconveniences as opposed to reasons ‘not to be a landlord’.
The major merchant banks are stating that 2022 will be a strong year economically. And the Bank of England may for now, no longer consider an interest rate hike this month given the short sharp shock of Omicron concerns. But Omicron may actually turn out to be a mild ailment and in fact this will then become a positive if it beats Delta and becomes a dominant but less symptomatic strain. If so, the coiled spring of pending spending and investment will surely be released.
The foregoing cocktail of ingredients all points to more demand and lower supply – the ideal recipe for a buoyant market both in rental and sales terms. And once the government gets its act together on arrears and the courts’ eviction process, the decks will begin to clear and normal business will resume - eventually.
Reasons to be cheerful? Yes, I rather think so.
This week, Paragon, the mortgage lender, announced record profits, up 80.5%, off the back of a ‘surge in demand’ from buy-to-let purchasers. So tell me, are you planning on exiting the buy-to-let market? The data from lenders that specialise in this market suggests not.
My advice is the opposite of baling out. It’s to double down in the London market and to grab a bargain whilst prices are relatively low – while you still can. London will always be London. And in financial terms, you can count on it.
* Marc von Grundherr is a buy-to-let landlord and is Director at Benham and Reeves, the 18 branch London estate and lettings agency *
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