Buying an Investment Property: Key Considerations in 2022

For the most part, it appears that the housing market in 2022 will offer much the same as what we saw in 2021, albeit in slightly more modest terms. Virtually all predictions point to the average UK house price hitting new heights yet again in 2022 as the buying boom continues and more people look to put down solid roots. Of course, this is not the full story.

House price growth remains highly uneven across the country, while the general trend is one that, although growing, is doing so much more slowly than in previous years. Perhaps most important is the ongoing boom in rental prices across virtually all major population centres, making a rare window of opportunity for investors. If you are considering adding rental properties to your portfolio in the coming months, keep these key factors in mind.

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Uneven yields

As with all things real estate, location is everything. This is especially true for those looking to invest in rental properties in the UK. According to this comprehensive guide for choosing the investment that’s the most appropriate for you, property or stocks, rental yields in London now average around 3-4% per annum but can reach 6-8% in high-growth cities in Northern England and Scotland. You should consider carefully where you are most likely to see long-term growth in returns, rather than simply focusing on your local area. 

Consider who is renting

When you invest in rental properties, you are a landlord. As a landlord, you can choose your tenants, but it is also up to you to market your property to tenants who are most likely to be interested. This is why doing your research is of paramount importance. In cities such as London and Manchester, young professionals are driving much of the rental growth in high-quality properties. Meanwhile, small families might be more likely to rent in the suburbs of the South East. Always use the resources at your disposal to figure out who is renting in your target area.

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New rules for UK landlords

Being a landlord comes with opportunities, but also responsibilities. You might already be aware of the legal requirements that landlords must fulfil, such as those regarding deposit security and maintenance. However, new rules are coming in the next twelve months. For example, all landlords must ensure that their rental properties achieve a minimum C-Class in energy efficiency prior to 2028, with hefty fines for those who do not comply. Meanwhile, the upcoming Renters’ Reform Bill aims to significantly expand notice periods for the cancellation of leases across the UK. Staying on top of these new rules now will help you to save on costs and stress further into the future.

Capital Gains Tax has changed

Since an investment property is an asset, taxes must be paid on any profits you have made on it. Previously, any landlord could simply file those profits on their next annual tax declaration and receive their payment notice thereafter. However, last year the rules were changed so that UK landlords must now pay capital gains tax within 30 days of selling an investment property. This means that you might need to pay taxes on profits before you have even received the money from the sale. Keep this in mind to avoid penalties later on. If you wish to participate in the rental market as an investor in 2022, these are the key factors that you need to keep in mind. The UK property market is dynamic and ever-changing, which means that ambitious investors must keep abreast of these changes in order to realise maximum returns on their investments and maintain strong relationships with their tenants.