Landlords have had to roll with the punches over the last few years. It all started with the removal of a 10% wear and tear reduction. Then there was the news of a 3% stamp duty surcharge and the phasing out of relief when claiming back mortgage interest.
Fast-forward a few years, and a global pandemic, not to mention a stereotype of rogue landlords that ended up falsely representing the majority, means there have been very few wins for property investors. Yet, the latest rental index from the Office of National Statistics (ONS) offers some good news.
Rental prices are on the rise, and an increasing number of people are turning to the private rental sector (PRS). So you could say there is a positive outlook for landlords as we head into the autumn months.
In this article, we’re unpacking the latest rental figures from the ONS and looking at what increasing demand could mean for the rental market in the long term.
The Covid conundrum
The pandemic, in particular, has thrown a spanner in the works for landlords. The property market started 2020 off in rude health, but the worldwide spread of coronavirus quite literally shut everything down. That saw almost no one move home during the months of March, April and May.
For many landlords, this meant tenants whose ASTs were expiring renewed in most cases, in the short term at least. But it still left plenty of uncertainty, especially around the state of the market post-Covid-19. Then there was the scenario with some tenants unable to pay rent, which was a difficult situation to navigate for all involved.
So it’s safe to say that landlords have had more uncertainty than they previously expected this year. With no rule book for how to navigate the current climate, many found themselves needing to be reactive to an unprecedented situation.
After a tricky few months, however, the latest statistics from the ONS will offer encouraging news for property investors all over the UK.
A rental rise
According to the latest data from the ONS, rental prices grew by 1.4% in the 12 months to July 2020. This represents an impressive increase, considering the circumstances. Unlike the stamp duty holiday for buyers, the rental market hasn’t had any perks to get it moving again.
The signs look promising so far and signal a desire for renters to move home without any encouragement from government-led schemes. Even London, a city that has stagnated in prime central areas, saw growth of 1.1% in the 12 months to July 2020.
While London has seen a rise, it still affects the overall data negatively. It’s lower numbers when compared to the rest of the UK are reflected by its higher rental prices: average rents nationwide are £965, while London is significantly higher at £1,585
Covid-19 may also accelerate the uptick in rents outside London, with many renters emphasising outside space amidst a possible second wave. Yet, even with the lower London number, landlords can still feel cautiously optimistic about the future.
The rental index seems to be stabilising, but it’s still some way off the pre-Brexit levels – and rental price growth has slowed since 2016. That’s not to say that landlords shouldn’t be optimistic about the market. They should, however, heed with caution as the next few months may still offer an uncertain climate.
The property market has rebounded in July, both for lettings and sales. But much of the future is still unclear, with possible second waves and unknown wait times for a vaccine meaning landlords might need to stick to their reactive stance for the rest of the year.
However, no matter what happens with Covid-19, demand in the rental market is on an upwards trajectory. And that’s something that landlords can be happy about, as higher demand significantly improves the chance of reduced void periods.
Catering to demand
Average branch registrations were up by nine to 79 in June, according to figures from ARLA Propertymark. It’s the highest year on year record for ARLA in the month of June. Overall, the private rental market is set to account for a quarter of all UK housing by 2021.
This is great news for landlords. But they will want to ensure high-quality tenancies, with renters enjoying their living experience and staying in a property for longer. One way of achieving this is through efficient property management.
The majority of renters are made up of Millennials, with a growing number coming from Generation Z. These demographics are tech-savvy and look for living solutions that mirror other aspects of their lives, such as ride-hailing in seconds, streaming on-demand and even ordering food with a few clicks. In other words, instant gratification.
A tech-led approach that enables property managers to perform the service side of the business more efficiently should go a long way to catering to demand while providing renters with instant answers to their queries. It can offer aspects like instant maintenance reporting, document access and live, real-time updates – elements that can have a positive effect on the landlord and tenant experience.
How to future proof the rental market
Covid-19 has thrown a massive spanner in the works in most industries, including the UK rental sector. But an increase in July rents suggests the market is bouncing back. Coronavirus has even arguably accelerated tech-led approaches in the market.
As more landlords adopt forward-thinking methods to manage their investment, renters will see an improvement in their in-life tenancies. The result can be a future-proofed rental market where good news doesn’t just come from a monthly bounce – it ends up being a continuous thriving rental market.