UK rental market sees surge in demand during Covid-19 06/07/22

In the weeks leading up to the lockdown on March 23rd, the nation was swept with concern as to how they would be able to provide for their households without the means to do so. The country was destined for an economic collapse like never before. That was until Chancellor of Exchequer, Rishi Sunak announced the ground-breaking UK furlough scheme to cover 80% of employee wages initially intended to last three months. He would later announce an extension of the scheme till the end of the July.  

PM Boris Johnson officially reopened markets in May which as regular readers of Elavace market reports will already know, has created a huge resurgence in the property market already. The second phase to the easing of lockdown was from June 15th; the reopening of non-essential shops inEngland. The more the marketplace returns to its prosperous self, the sooner the government can taper off the furlough scheme.

Sunak has made it known that his scheme’s level of subsidies would need to be cut in the second phase running to the end of October. The government will enforce the changes for employers to start paying 20% of workers’ wages as well as covering their national insurance and pension. These changes sent shockwaves across employers groups warning that a dramatic change to the scheme at the end of July will lead to tens of thousands of redundancies.

Elavace have expected a huge downturn in employment for months now and has countlessly reiterated the opportunities this presents to both current and new property investors. A rise in unemployment is going to directly impact the level of mortgage defaults and consequently shift demand for rental properties. After all, people are always going to need somewhere to live!Therefore, due to job losses and reduction to income; renting has and will become the only realistic option for the vast majority.

When will the demand for rental homes start to rise?

Newly released figures from Goodlord have shown that this shift is already starting to take course just weeks out of the lockdown. Demand for rental properties has steadily gained pace since restrictions on moving to anew house were lifted on 13th May. According to the data, the first fortnight in June witnessed both new and completed applications flourishing way above 2019 levels.

Make no mistake about it, the rental market has rapidly bounced back sweeping agents off their feet after months of pent up demand. So far, the busiest day of new applications has been 2nd June, rocketing past the volumes recorded on the very same day in 2019 by a colossal 112%. As for completed lets, the busiest day has been 10th June, when activity levels formidably reached 124% of that recorded in 2019!

Tom Mundy, COO at Goodlord, comments: “It’s been an incredibly busy few weeks for letting agents, landlords and tenants. They’ve risen admirably to the dual challenges of a surge in demand coupled with a totally new way of working and doing business. We are starting to see some much-needed stability and consistency in the market. Alongside this, we’re seeing agents embrace new tools, processes and strategies to ensure lettings can continue safely across the UK.”

New applications appear to have finally reached an equilibrium, comfortably averaging 97% of 2019 levels in the last fortnight. Completed lets had been consistently averaging 94% of 2019 levels since June 1st.That was until 7th June, where levels experienced a significant increase each day through till 13th June, all the while maintaining higher levels than the 2019 average.

What does mean for rental prices?

Well, it’s still too early to say. However, this week, theOffice for National Statistics (ONS) released figures which reveal that as theUK headed into lockdown, private-sector rents in England hit a record high of£700 per month. The data spanning from 1st April 2019 to 31st March 2020 was described by the OBS to “have not been higher”.

The ONS found that the median rent was highest in London at£1,425 a month, and lowest in North-east England at £495. If we were to look at these regions more specifically; the most expensive location to rent was the bustling government area, Westminster, where the median rents were at a premium £2,492 per month. Living in Westminster proved to be five times more expensive than renting in England’s cheapest location, Hull, where tenants typically pay£420 a month.

These record-high rents have fuelled recent concerns about affordability given the upcoming unemployment crisis the country has in store.Earlier research has found that renters on average spend 41% of their income on housing costs. This is alarming considering the 8.5 million people currently renting privately in England, many of which may face a reduction of income incoming months.

As addressed previously in this article, the number of people renting privately in England is only going to increase as jobs become more and more uncertain. This means that now more than ever before, demand from tenants is quickly outweighing the number of rental homes available. For this reason, the housing market will soon need an injection of willing landlords to bolster up the rental market and provide much-needed living for those unfortunate. We have learnt that prior to lockdown, rental prices were already reaching staggering heights. Whether or not the pandemic prompts a slump in house prices, very few housing experts are predicting that rents will fall.

Researchers from the highly renowned property specialists, Savills UK this week revised their house price forecast for 2020, and now expect a 7.5% fall in 2020, down from a previous forecast of -5%. They also went on to predict that rents would fall by just 1.5% this year before rising by 5.5% next year.

Savills said: “Rental values tend to be more resilient than capital values during a downturn. Rents fell just 2% following the financial crisis, whereas house prices fell -18%. We expect rents will also remain relatively resilient in the coming months and years, albeit there may be greater pressure in areas more reliant on international tenants and students.”

The property market is quickly becoming a hunting ground for cash investors to find some serious bargains now more than ever before. Just ask Elavace’s very own developer, Mitch Walsh who is currently offering built and tenanted properties at unrivalled prices for a limited time only! Whether your aim is to generate lucrative rental yields or strong capital gains in the longterm; Elavace is the best place to start! 

Are you somebody who prefers hands-off investments? Even better—we offer exceptional services through our sister company, Elavace Estates who will manage every aspect of your property journey from start to finish! Our priority is to offer you the most hassle-free investment as we possibly can. This starts at choosing from the queues of vigorously vetted tenants who are ready and waiting to move into their new home.

Visit our website and browse through our limited selection of once-in-a-lifetime property investments still available!

Alternatively, get in touch today at: 0151 308 0001. We look forward to hearing from you.