Following a seven-week shutdown between March and mid-May, the lettings market has been reopen for business for over two months now.
During this time, it's been widely reported that activity has recovered as tenants looking to move before lockdown re-entered the market and a new group of movers who decided to move more recently have also taken action.
This has been positive news for letting agents, who have been able to process more tenancies and keep their landlords' properties occupied.
As lockdown measures continue to ease and we come out the other side of the Covid-19 pandemic, how is the rental market performing now and what could happen in the coming months?
How has the market recovered since lockdown?
Evidence from a variety of sources in recent weeks has shown that there has been a surge in tenancy applications, new lets and, in some areas, rising rents thanks to a supply/demand imbalance.
According to the Deposit Protection Service, new tenancies are now almost back to pre-Covid-19 levels. It recently reported that it registered 32,000 new tenancies in April, down from 60,000 in March. However, the figure recovered to just under 56,000 in May, following the reopening of the lettings market. Meanwhile, Rightmove reports that average rental asking prices outside of London have hit an all-time high post-lockdown.
Average asking rents outside the capital average £845 per month over the last three months, a rise of over 3% when compared to the same period last year. Rents in the capital during this period dipped by 0.6%, which, Rightmove says, is down to a rise in rental property supply following the reopening of the market.
Challenges for the lettings industry
Current market conditions mean there could be a rise in rental property supply. On the one hand, this would mean more properties for agents to manage, but landlords could be faced with lower yields if average rents drop off. If the trend for tenants moving out of big cities like London continues, those that stay could have more room to negotiate than before as competition won't be so high - so this will be another consideration for landlords and agents.
Meanwhile, there is plenty of evidence to suggest that now is a good time for investors to expand portfolios - especially now a stamp duty holiday has been announced. It will be crucial for agents to encourage landlords to invest, while also making sure they can provide the applicants needed to fill vacant properties.
Another ongoing challenge for property professionals is making sure they are following new health and safety guidelines while dealing with higher than usual levels of demand.
Alongside battling the impact of Covid-19, agents have already had to take into account various regulation updates this year, including the extension of the Tenant Fees Act and the introduction of mandatory electrical checks.
This is where the best PropTech solutions can help agents to provide a better service to their landlords, while also reducing workload and ensuring compliance.
What could happen next?
It's likely that the high levels of activity in the rental market will continue over the coming weeks and months as tenants take advantage of being allowed to move again, while landlords look to capitalise on increased demand.
Following the lockdown period, it's become clear that tenants will consider access to outdoor space as a high rental property priority. What's more, there have been several reports suggesting that due to increased working from home and people aiming to achieve a better work/life balance, there could be a shift away from living in dense city centres.
The pandemic’s full impact on the rental market and tenants’ needs will take some time to become crystal clear, but it's fair to say that some aspects of the market will change forever post-Covid-19.
For landlords and investors, the recent news of a stamp duty holiday will have provided a timely boost. This could see a surge in purchases between now and the end of March 2021, providing agents with the opportunity to manage more properties.
That said, subsequent news that the Chancellor is aiming to recoup funds spent on the Covid-19 recovery by increasing Capital Gains Tax could temper this demand.
When it comes to tenant finances, there could be a spike in rent arrears due to increased redundancies as the government's furlough scheme begins to wind down from August and finishes at the end of October. Therefore, it remains important for letting agents and landlords to continue to monitor payments efficiently and agree affordable repayment plans with tenants in difficulty where possible.
Moving forward, tenant referencing will take on greater importance than ever before and having the option of cash alternative deposits will be even more crucial for many renters.