There’s no denying that the UK’s rental sector has suffered at the hands of the Coronavirus pandemic. The capital has faced blows to tenant demand, and yet another extension to the eviction ban has left many feeling frustrated over the mounting debt crisis it’ll leave behind.
It would be naive to think that the industry has got off lightly—but that’s not to say it can’t bounce back either. While WFH has introduced fresh ways to market properties, the vaccine rollout will help inject life back into city centres. And let’s not forget about the influx of students come September.
All doom and gloom aside, the future looks bright. Here at HomeHero, we’re going to delve a little further into why the UK’s rental sector can not only survive but thrive in a post-covid world.
Fighting for demand
Once the pandemic came into full effect, the UK waved goodbye to most of its foreign-born residents. According to the Economic Statistics Centre of Excellence (ESCoE), the population dropped by 1.3m—the most significant decline since the Second World War.
London endured the hardest hit, as ESCoE believes a whopping 700,000 non-UK workers fled the city to return to their countries of birth. The homeworking revolution added fuel to the flame, as many native office workers also left in search of cheaper housing and more space.
This left properties in Central London to become like a bottomless pit. In February, rents were down by 17.7% year-on-year, and some in the most expensive areas even had offers at 30% below the asking rent.
These steep rental discounts have certainly attracted tenants. According to Foxtons, the leading UK real estate agents in London, registrations of prospective tenants were up by 44% year-on-year in January and February. In East London, this figure sat at 61%.
So, this strategy seems to be working in fuelling the capital’s supply. Tenants are keen to lock in deals, and motivated landlords are willing to take losses—but most know that this isn’t sustainable.
Faith in the roadmap
At Foxtons, the average rental tenancy length now sits at 12.2 months, as opposed to 15 months before the pandemic. In 2019, the usual tenancy agreement was about 18 months, said Ed Phillips, managing director at the firm.
So, both property managers and tenants know that these discounts will not be lasting for the long-term. But if the vaccine rollout continues at its current pace and the Government’s roadmap goes as planned, London will have much more to offer prospective tenants.
Richard Davies, Head of Residential Lettings at Chestertons, predicts the ‘bounce back’ London’s real estate sector will experience come June. “The corporate relocations will return, short-term lets will return, demand and supply will even out, and rents will stabilise”, he tells The Telegraph.
But what’s most exciting is the possible revival of the office. In a recent survey, around 70.7% of employees said they still want their businesses to have an office of some sort in the future.
66% said they’d like an office for team culture, whereas 49% mentioned team socials. In a separate study, 49% of respondents said that the pandemic had not changed their view on commuting or travelling for in-person meetings—with 35% saying they’ve even missed them.
What these statistics tell us is that office workers have missed the social aspect of workplace culture. It’s something that working from home can’t entirely replace, and the buzz of London life is what seals the deal.
To say that renters won’t return to the city or commuter zone to facilitate a new ‘normal’ of both office and remote work is unrealistic—property managers must have faith that the roadmap will help replenish the cities.
New opportunities for property managers
But we can’t assume that every renter who left London’s hustle and bustle will race back either. While rents fell in Central London, they grew in the outskirts by 5.3% and 10.6% in the South East.
This is because many renters sought out larger properties with gardens or better access to green space—and it’s the evolving trends around commuting and working from home that allowed this to happen.
As a result, a new tenant profile is emerging; the ‘try-before-you-buy tenants. At Savills UK, 64% of their regional letting agents have seen an increase in these types of renters, reflecting a broader trend where people are choosing to rent as a lifestyle choice.
They’ve also seen an increase in demand for larger family homes in London’s outer boroughs and more rural areas. With this in mind, property managers could start investing in these properties and locations to really take advantage of new real estate trends.
Some have already begun to do this. In a recent research study, 10% of landlords said they were planning to purchase new rental properties and expand their portfolios.
Hamptons also said it sold 31% more homes in outer London to landlords in 2020 than in 2019, thanks to lower prices and the stamp duty holiday.
And since the latest extension is until the 30th of June, there’s no better time for property managers to strike while the iron is hot and cater to this new wave of tenants and their needs.
What about marketing?
But buying more properties isn’t the only way you can do this. Since flexible working is the new norm, tenants will be prioritising an adequate home office, and landlords who use this to their advantage may yield the best results.
For example, property managers can advertise a 2-bedroom property as a 1-bed with a spacious home office. You could supply furniture, wall art or even smart technology to attract prospective tenants who’ll be willing to pay a slight premium for a functioning home office.
If you’re letting out a 4-bed house-share, you could even transform the largest room with the best natural light into a coworking space. That way, tenants can still work collaboratively on the days they’re not needed in the office and get the social interaction that most employees have craved.
It’s these small things that’ll help to attract and retain the best tenants—and in a post-covid world, this may help get the rental sector back on its feet.
Lastly, let’s not forget about the influx of students that’ll return to universities this September. According to UCAS, 616,360 applicants were secured on the January 2021 deadline, compared to 568,330 applicants in 2020.
These are record-breaking stats. In previous years, the number of prospective students applying at this stage has never shown this type of jump—559,030 applicants in 2018 and 561,420 in 2019, for example.
So, the fact they’ve risen to these figures already should provide solace to property managers for the future ahead. The numbers have increased in every region of the UK and most age groups—and there’s still the summer deadline to go.
And although the possibility of in-person teaching and student nightlife is still a little unclear, we must remember that the vaccine rollout is on track to vaccinate all UK adults by the end of July.
Young people are keen to make up for lost time learning and socialising and will not hesitate to return to bustling student cities should the roadmap allow.
It’s true that property managers, especially those in the capital, should prepare for both outcomes. But old habits die hard, and there’s no reason why London, voted the best student city in the world consecutively, will not welcome back its students post-covid.
So, there you have it—a small glimpse into how the rental sector can get its ‘mojo’ back post covid. While its recovery won’t be easy, there are some clear trends and data that’ll help it bounce back. Have faith and watch this space!
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