Life has changed drastically over the past 12 months since the coronavirus plunged us into multiple lockdowns.
But we’re not going to talk about zoom hangouts, socially distanced walks and online shopping.
Instead, we’re focusing on one of the most frequent questions we’ve seen from our followers, podcast listeners and forum members – how much has the lettings market been impacted by the COVID-19 pandemic?
But now the smoke has cleared (somewhat), we’re shedding light on how it’s affected rental properties and the lettings market.
We chatted with our Property Hub Lets team to get their take on how COVID-19 has impacted the lettings market.
Prior to 2020, investing in a city with a reputable university would almost guarantee you a healthy stream of students. That’s why being in close proximity to educational institutions is one of our fundamentals for investment areas.
But travel restrictions for international students, shifting from in-person lectures to online courses, and hesitation from parents to let their kids travel, have put a temporary hold on this previously reliable stream of tenants.
While the impact is definitely still being felt, it’ll take more than a pandemic to stop teenagers wanting to move to bustling metropolitan cities to study. So this change is one we expect to see revert back to the status quo as classes (and normal life) resume.
This one wasn’t a surprise. Employment figures in the UK have taken a major hit, with unemployment reaching 5% for the first time since 2016. It was inevitable this would impact living situations all over the country.
As entire industries closed off, restrictions were introduced, and regions moved in and out of tiers, it’s been an uncertain time for many people, with some left unable to pay their rent.
Naturally, this has resulted in a spike in the number of tenants handing in their notices. Of the reasons given to landlords, many said they’re moving back in with parents. This is either to save money while they can work away from the city, or because they’ve lost their job.
As measures are introduced to reverse this knock on employment figures (such as the extension of the furlough scheme), we’ve already seen a resurgence in the rental market as confidence picks up. This is something we expect to continue as we head out of lockdown restrictions.
Back in March 2020, we predicted there would be an increase in rental arrears.
Jobs were lost and tenants didn’t have savings to cover their rent, leading to a surge in rental arrears.
We’ll talk more about how this impacted landlords shortly, but this really reinforced the need for landlords to have an adequate cash reserve or Rent Guarantee Insurance in place to help cushion the blow.
Landlords… you need a contingency plan.
Just as tenants have had a tough time, so have landlords.
Yes, viewings have become more difficult, but property management has been a whole different ball game.
A global pandemic can stop many things, but the breaking down of appliances isn’t one of them.
Broken washing machines, boiler issues… things that would be a doddle to fix or replace on a normal day became nigh on impossible. We also saw supplies running low along with maintenance repair availability.
Many landlords and letting agents are still dealing with the backlog.
However, the tables are turning as people return to work and case numbers drop, so this isn’t a trend we expect to continue. It’s also a (very worthwhile) reminder that regular reviews of your portfolio will be beneficial. That way, faults can be spotted earlier and hopefully result in less emergencies from tenants.
As tenants were giving notice, replacement ones became like gold dust as social distancing rules impacted property viewings.
Again, this has improved more recently but it’s meant that void periods may have been slightly longer for landlords as viewing numbers were drastically cut to ensure safety measures were adhered to.
Many agencies pivoted to video marketing early doors so tenants could get a feel for a property without physically viewing it – an example of proptech coming to assist the landlords.
We’ve already talked about having to restrict the number of viewings to adhere to guidelines, so naturally the prequalification of tenants has had to double-down to eliminate time wasters.
Viewings now need to be COVID-19 safe – that means extra PPE and limited numbers, so before a viewing is booked, all the boxes need to be ticked to book an active tenant into a viewing.
There have been some wider behavioural shifts, which have less statistical evidence, but have definitely played a part in COVID19’s impact on the property letting market from what we’ve seen.
Different landlords have dealt with the pandemic in different ways.
Some reduced rent or passed the mortgage break over to the tenants. But others weren’t in a position to help their tenants navigate though it by offering anything. It’s very circumstantial, but goodwill from landlords didn’t go unnoticed on social media and in the press.
As some left their city homes for their parents’ homes, others sought solace in more suburban or rural areas.
It’s worth noting that the closure of hospitality has played a huge part in this behavioural swing too. We’ve already seen an increase in demand for city centre properties now the UK has a roadmap for re-opening.
The move to more suburban and rural parts we imagine will continue to play a part. But we anticipate city centre living will start to peak once again over the next few months – a trend that’s already being seen down south.
It remains to be seen just how long the lettings market will be impacted by COVID-19.
With the vaccines being rolled out in the UK at the fastest rate in Europe, we’re slowly inching closer normality. The future is certainly looking much brighter than we’ve seen the last 12 months.
But whether it happens in the next few months or a little longer, the lessons we can learn from the experience of 2020 will no doubt serve us well when it comes to safeguarding our portfolios and investments in the future.