The Residential Expert - October 2020

The Residential Expert - October 2020

LANDLORDS TO OFFLOAD INTO BUSY SALES MARKET?

Since the Housing market reopened post-lockdown it is safe to say that agents have been experiencing somewhat of a mini-boom. The temporary cut in Stamp Duty, designed to reignite the housing market post Covid-19, has most certainly contributed to this.

But whilst the sales market has seen an upturn, what of the lettings market? Specifically for landlords whose tenants are very likely to form a large percentage of workers who have been affected by the closures and limitations imposed on businesses due to the pandemic?

According to the National Residents Landlords Association (NRLA), significantly more needs to be done to financially support landlords and renters during the on-going situation. As coronavirus continues to put a strain on the economy, confidence in the private rental sector is falling - with almost two thirds of Landlords in England and Wales expecting their rental business to be adversely affected by the crisis (statistics from 2000 NRLA members surveyed). 

Indeed some of the upturn in the sales market could be due to buy-to-let landlords offloading property in response to the heightened concerns; 30% of those surveyed have said they are looking to sell at least one property over the next 12 months.

This is of course a fairly small sample group given that there are over 2.5 million landlords in the UK. But if these results were to be scaled up it could see 750,000 buy-to-let properties being sold over the course of next 12 months. Great news for anyone looking to buy a house but not if you are one of those tenants affected.

One of the main reasons that landlords are looking to sell is due to the risk of tenant arrears caused by the unknown impact of the end of the furlough scheme and the on-going impact of the virus. 

In August 2020 it was reported that as many as 1 in 12 renters were currently in some arrears. With 94% of landlords estimated to be individuals with one or two properties, and not property tycoons with a limitless amount of cash to be able to subsidise tenants indefinitely, it could mean that tenants would find themselves being legally pursued for the non-payment of rent; thus having severe consequences on their credit rating for years to come.

With the extension of the eviction ban earlier in the year, many landlords have found themselves out of pocket for a number of months since March and, even now the 30th September date has passed, the required 6 month notice period that landlords have to give (unless the tenant is more than 6 months in arrears and/or is causing issues due to anti-social behaviour), means that there is still no light at the end of the tunnel for many that have been affected by Covid-19.

Many landlords have been supportive of their tenants throughout this tough time and have agreed temporary reductions or deferrals on rent to try and prevent their tenants from falling into arrears. They will certainly be buoyed by the figures when looking at new tenancies signed over the past couple of months.

Despite all of the doom and gloom cast onto the market by the NRLA’s survey, research carried out by Homelet in September 2020 has found that the average rental price in the UK for new tenancies is infact up by 2.1% to £987 from last year; a small increase of 0.2% since August 2020. 

Excluding London, the average UK rent is now £828; an increase of 3.9% since this time last year. Average rents in London continue to see drops year-on-year showing a 2.8% fall between September 2019 and September 2020. The average rental figure in London of £1,646 was still an astounding 98.8% higher than the equivalent for the rest of the country though.

But, in 10 of the 12 other regions monitored there was an increase in rental values between this same period; with the South West particularly standing out with an increase of more than 6%.

Those landlords who have remained committed to the sector throughout and have confronted the challenges presented not just by Covid-19 but also the impacts of taxation changes, regulatory requirements and all other factors they have faced over the past 18 months, may find themselves rewarded for their perseverance with reasonable returns on their investment over the coming months.

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