Before Covid-19 had everyone on the backfoot, the UK rental market was booming. At least, it was from a demand perspective. Generation Rent continued being one of the most important players in the property scene, and a quarter of the UK housing market was predicted to consist of private renters by 2021.
Coronavirus shouldn’t impact those numbers too much: we’re still set for increased demand in the rental market. But the way people rent and let homes will take on a new normal in a post-pandemic world.
In one sense, it’s a case of “the more things change, the more they stay the same”, with demand still outstripping supply. On the flip side of the coin, however, some change in the rental market is inevitable. In fact, it’s already here.
Will rental prices fall in the short term?
Rent paid by private tenants increased 1.5% in the 12 months to January 2020 across the UK. Not a massive increase by all accounts, but an upward trend none-the-less. By June 2020 – and perhaps surprisingly – rents were up on the previous 12 months by 1.1% to an average of £951 per calendar month.
In the short term, it looks like the Covid-19 pandemic hasn’t impacted UK rental prices too drastically. However, we’re still in the very early stages of recovery, with lockdown restrictions only eased at the beginning of July.
Making sweeping predictions on how the private rental market will look is no easy feat, though it’s not unreasonable to think that asking rents will fall slightly in the short term. June, July and August are typically three of the busiest months in the market, and, likely, demand will still be high – especially as a backlog floods the market.
Yet, until the real economic fallout of the coronavirus becomes clear, we’re all in a “wait and see” situation. Certainly, where rents are typically higher – in London, for example – it wouldn’t be a surprise to see lower asking pricings in the short term.
Tenant behaviour during the new normal
Tenant behaviour looks set to change post-lockdown, with many renters having a re-think about what they want from a rental property. Previously, you could hedge your bets on tenants wanting somewhere with convenient travel links and access to local amenities.
For many, however, demand for property in busy city neighbourhoods will be replaced with homes that offer outdoor space and good internet connections. As more people continue working from home, the need for proximity to transport won’t be as pressing either.
This could leave some landlords asking questions about their next portfolio move and whether it’s worth investing in previous prime rental hotspots, in the hope new renting behaviour is temporary, or look toward more rural areas where open space takes precedence.
How will the landlord-tenant relationship look post-coronavirus?
Much of the talk around the rental market during coronavirus has been about bans on no-eviction. And rightly so, with some certainty needed at a time where there is anything but. However, there hasn’t been much focus on how specific scenarios impact all involved.
Buy-to-let mortgage holidays were announced to make sure landlords didn’t go out of pocket. But you only need to do simple maths to realise that a property achieving £1,300 per month on a £400 interest-only mortgage would leave a landlord out of pocket should the tenant struggle paying the rent.
Even with the £400 mortgage freeze, there’s still a £900 deficit to make up, and that’s not even taking into account service charges and ground rent on purpose-built apartments (a vast majority of the buy-to-let trade).
On the other hand, any tenant who just lost their job but was expected to keep paying rent found themselves in an almost impossible situation. From our experience, communication between landlords and tenants has been amicable, with temporary rent reductions put in place or payment holidays for tenants until they were back on their feet.
However, there are bound to be some cases where tenants leave properties due to a lack of empathy from difficult situations with landlords, agents and property managers. Such a predicament increases void periods and won’t paint agents and property managers in good light if they’ve not been particularly emphatic.
Why the emphasis will be on technology-led processes
As we enter the world of new normal, service is going to be more vital than ever – for landlords and tenants. Landlords will require more transparency over their portfolios, so they can keep tabs on how the market develops. While tenants will want a smooth in-life tenancy that doesn’t throw up issues like waiting an age for repairs.
Much of how the market progresses is in the hands of the property professionals: the letting agents, property managers and providers. How they respond will set the tone for landlord and tenant relationships and the overall functioning of the rental sector.
Letting agent adaptation
Before the lockdown, many agents were just about getting by using old-fashioned methods that incorporated some aspects of technology without fully embracing others. However, having had a shock to the system with elements like remote working over the past few months, it’s clear that many need to re-think their models and begin to modernise them.
Communication is a vital requirement for property managers. Yet, for too long, they’ve relied on emails and the odd phone call without any real processes. Tenants are already becoming more tech-savvy pre-coronavirus, and the current landscape will only increase their demand for better processes and efficient methods for managing their in-life tenancy.
Finding a solution that combines technology with humans
The key lies in finding the right balance between technology and humans. Many have developed tech solutions to some of aspects, especially when it comes to PropTech. But the real results for a post-pandemic world will come with options where technology underpins property management and lettings and the people working behind it.
There is a rush for technology to fill the gaps left by Covid-19, but it needs to solve the issues currently faced in the market: more transparency, faster processes, some automation, and empowering human professionals to do their job et cetera.
A holistic approach is required to create seamless lettings and property management where everything flows fluidly. As the market recovers, these methods will replace old ones to ensure that the new normal just becomes normal. And the UK rental market will be better off for it.