Let Rental Property Market

What’s Happening In The Rental Market?

Market Predictions, Property News

Lockdown 1.0 brought the rental market to a grinding halt. Since then, however, it has managed to find its feet in a “new normal”. Here are some of the key points to note.

London is lacklustre

This is unlikely to come as a surprise to anyone who’s been watching the property market. What may come as a surprise, however, is just how badly the capital has been performing. London rents are down 5.2% year-on-year, by comparison, Yorkshire and the Humber are up 2.3% and the North East is up 3.2%.

As it stands, there’s little reason to think London is likely to gain ground anytime soon. In fact, there are a lot of reasons to think it won’t. Firstly, many businesses were shifting at least some of their staff out of London before the pandemic struck. Now London will not only be competing with the Midlands and North but also with remote working.

In fact, even hybrid working could be bad news for the capital. If you’re only going into the office once or twice a week, you’ve less incentive to pay commuter-belt rents. In fact, if you’re saving for a deposit, there’s a very strong incentive to pay less on rent and put up with a lengthy commute a couple of times a week.

Rent arrears are currently a significant pain point

Given everything that’s happened in 2020, it would be little short of astounding if rent arrears were still at their usual levels. It’s also unsurprising that commercial landlords appear to be having more of an issue with rent arrears than their residential counterparts.

Just as the laws on commercial lets are very different from the laws on residential lets, so commercial tenants are often very different from residential tenants. Business can be closed down and if they’re incorporated creditors can (generally) only pursue the business for monies owed, not the people behind it.

People, by contrast, always need somewhere to live. This means that one way or another, it’s usually in their best interests to work with their current landlord. This helps to protect their credit record and also means that they can get a positive reference if they need one.

Landlords may face increased competition from room-letters

The impact of COVID19 (and potentially Brexit) may encourage people to take advantage of the government’s rent-a-room scheme. If it does, the result might be that there would be a general “downshift”. In other words, people might rent rooms instead of studios, studios instead of one-beds and so on.

Currently, it’s unclear whether or not this will happen. If it does, the impact will probably be directly linked to the level of demand. At present, this is very high so the market could probably absorb the new entrants without any real issues. If, however, it drops then entry-level properties (such as HMOs) could quickly be impacted.

One straightforward way to address this would be to make sure that even entry-level properties are decorated and furnished to a high standard. In particular, make sure that there is some sort of work area. Even a folding table and a decent chair can make a room more appealing.

Author Bio

Mark Burns is the managing director of property investment company Pure Investor, who specialise in UK property investment and Buy-to-Let Property Investment.

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