Renovation and refurbishment key trend for buy-to-let market next year ‒ Searle

The emphasis on advisers is to stay ahead of the market trends so that you are best placed to discuss your clients’ objectives and finance requirements.

So, what trends can we expect next year?

Front of mind is bound to be the new energy efficiency requirements for rental properties. Currently, domestic private rental properties must meet a minimum level of energy efficiency of an EPC rating of E.

However, from 2025, all newly-rented properties will be required to have a certification rating of C or above, and this will apply to all existing tenancies from 2028.

This may seem like a long time into the future, but that time will pass quickly. The costs to convert a property from an E to a C rating could be extensive, potentially including work like insulating walls and the roof, upgrading the heating system and installing double or triple glazed windows. The sooner you raise the topic with your clients, the better prepared they will be to carry out any required renovations.

Renovations and refurbishment projects are likely to be a continued theme going into 2022 as investors continue to identify opportunities to add value to property in a competitive market. We expect growing demand for products like our bridge-to-let proposition, which combines the flexibility of a short-term loan to finance the work, with the certainty of a guaranteed exit onto a term loan.

I also expect investors to be more ambitious with their refurbishment projects, renovating holiday lets and HMOs as well as standard buy-to-let properties.

There is good reason to think this. The popularity of holiday lets has been well documented this year, and properties have been in high demand as options for going abroad have been restricted. Travel is likely to become easier in 2022 and beyond and, while we expect continued demand for staycations, holidaymakers are likely to have greater choice and there will be a flight to quality.

This means that properties that are refurbished to a high specification, with amenities such as car charging points, will be the ones most able to continue to command high prices and impressive yields. With HMOs too, we could see a flight to quality with demand growing amongst professionals who moved to more rural locations during the pandemic and require somewhere to stay close to their office for a couple of days a week.

Normalisation of market conditions

The return to office working, in whatever guise it takes, is good news for London, which has bounced back in terms of property sale and rental prices in 2021. In fact, according to the Knight Frank prime residential price forecast for 2022, London has anticipated growth of seven per cent in capital values over the next year, which represents its strongest rate of growth for eight years.

Knight Frank says an end to lockdowns, a reopening of travel, the winding up of the stamp duty holiday and the absence of political turmoil over Brexit will see a normalisation of market conditions. Plus, sizeable discounts of 20 to 30 per cent exist for euro and US-denominated buyers when taking price and currency shifts into account since the EU referendum in June 2016.

There are opportunities for investors but there are also potential hurdles. Whatever happens, professional mortgage advice will always be necessary and helping your landlord clients navigate the course of the year will help you to develop more long-lasting relationships that will open up new opportunities in the future.