The pandemic has changed the course of the residential real estate market. When COVID-19 emerged in 2020, the real estate market was shaken as it didn’t know how to deal with it. However, after two years, the real estate market is slowly going back to what we knew during pre-pandemic times.
Now that the world has embraced the “new normal”, it’s time to examine the residential rental market to determine the expected trends that will shape the industry in 2022. Below, we have outlined a couple of predictions that real estate investors should be aware of:
#1 Increase in Rent Prices
Cities saw a rapid decline in rent prices as people moved away from densely populated areas in 2020. Due to the low demand, landlords had no choice but to lower their rent to attract the tenants that remained. However, rent prices are slowly returning to their pre-pandemic levels as renters are moving back to certain markets. Data shows that areas such as Austin and Seattle are seeing a consistent surge in rent prices, with Florida at the forefront with a rent increase of 33.3 percent in the Tampa to Clearwater area, and 31.6 percent in the Miami to West Palm Beach area.
#2 Demand for Rental Units
Another prediction that’s making rounds among property management companies is that the demand for rental units will likely increase. Those that can’t afford to own a house will continue to rent, and since people are moving back to their markets, the competition will be intense. In addition, those that moved in with others during the COVID-19 pandemic will now move out. This adds to the demand for rental units. Real estate investors can leverage this situation by renting out their units at a competitive rate.
#3 Demand for Larger Rental Units
The work-from-home life isn’t over even if the pandemic is. In 2021, renters were in the market for rental units where they could work. While workers are going back to their office buildings, a few are continuing to work from the comfort of home. Hence, the demand for large rental units won’t go away in 2022.
However, since large rental units aren’t affordable, your renters will likely look for roommates. With that said, you should be open to allowing your tenants to sublet the unit. It’s worth mentioning that the world is still recovering, so your tenants aren’t willing to “live large” even if they want a large living area.
#4 Popularity of Virtual Tours
One of the ways that management companies adapted to the pandemic was the use of virtual showings as an alternative to face-to-face tours. Since a house isn’t a small investment, potential tenants naturally want to see it in person. However, due to restrictions, they were forced to house-hunt through virtual tours for over a year.
Although face-to-face tours have returned, tenants have seen the convenience of virtual tours. In other words, they’ve gotten used to the way showings were done during the pandemic. Eventually, tenants will want to see virtual tours along with the listing.
If you have a vacant property that you’re planning on renting out in 2022, consider hiring a property management company that can help create a virtual tour. Even if your tenants will visit your property in person, having a virtual tour in your listing can be an advantage.
#5 Increase in Rent
Unless your rental unit was managed by a top property management company, you probably lost a lot of income in 2020 and 2021. That’s why one of the forecasts for 2022 is that rental rates will soar to recoup the rental losses. If raising the rent is insufficient, landlords could choose to sell their rental units instead. As a result, this will lower the supply of rental units.
In addition, landlords that have tenants who haven’t paid their rent are likely to kick their tenants out. Since the U.S. Centers for Disease Control and Prevention (CDC) Moratorium is no longer applicable, landlords can file for an eviction whenever they want to.
#6 Interest in Short-Term Rentals
Another residential real estate trend entails short-term rentals. During the pandemic, renters were able to relocate anywhere as they no longer needed to go to the office. In 2022, this convenience will continue to appeal to “digital nomads” who want to live in a new area without commitment. However, it comes with a catch – they also want to be able to move out when they want to. That’s why this year will see a preference for rentals that are as short as three months.
From a landlord’s point of view, short-term rentals allow them to better adapt to the rental environment. In other words, in case there’s another crisis, a short-term rental contract provides landlords the opportunity to decide what to do with their real estate investment.
#7 High ROI for Real Estate Investors
The demand for rental units is rising, which means that property owners can increase their rental rates. With that said, 2022 is going to be a competitive year for real estate investors. This provides you the opportunity to invest in more properties so that you can make the most out of the rental market.
Be sure to keep seasonality in mind when looking for properties to add to your portfolio. You should also consult a property management company that provides investment services to ensure you invest in the right property at the right time.
2022 will see the return of renters to populated areas, however, the trends that we saw in 2020 and 2021 will remain. The last two years have been unpredictable, but as long as the pandemic continues to take a downtrend, the residential real estate market will be strong for the foreseeable future.
An expert property management company such as Luxury Property Care can help you navigate the real estate environment as it recovers in 2022. Contact us today for an obligation-free consultation by calling (561) 944 – 2992. You can also complete our contact form to learn more about the property management services we provide in South Florida.