The last 12-or-so months have thrown up some real surprises in the property market, including, somewhat oddly, a housing boom. If you cast your mind back to March 2020, to the beginning of the first lockdown, the situation looked bleak, and the property market feared the worst.
Sales and rentals headed into the unknown, which included a complete shutdown of the property sector between March and May 2020. However, more than one year on and we can start to paint a clearer picture of how the rental market performed in particular .
From a boom in rural areas to a slowdown in the capital, Covid’s impact on renting is far-reaching – and not always in a negative way. But just what has happened? The purpose of this piece is to summarise the rental market since Covid, looking at the good, the bad and the surprising.
The bigger picture
News about the rental market’s performance during Covid is resoundingly positive. In the 12 months from March 2020, rental prices saw a 3.4% increase nationwide, with average rental prices £922 per month.
An increase during a recession is virtually unheard of, and along with the sales market, it points to a favourable climate in the property sector. Despite the UK shutting down on three separate occasions, people’s desire to move home has remained strong.
Part of this is down to the stamp duty holiday announced by the Chancellor last July. Yet, this only partly explains an increase in sales that includes a record number of property investors buying bricks and mortar. The rental sector has also performed well due to people’s changing needs, with a desire for more open space becoming a priority.
The UK rental boom
The Midlands and the North are the real winners in the rental market, with the East Midlands, in particular, seeing a 10.5% increase. Ten of the 12 UK regions also saw an uptick in rental values.
One of the driving factors for increased rents outside of the capital focused on demand. With more people working from home, the need to live in big cities like London perhaps lost some of its allure, so we’ve seen a surge of renters moving out to rural locations.
An uptick in renter supply, coupled with a dip in landlords for the first part of 2020 also saw demand skyrocket. Fewer available rental homes have driven up the price in areas where the need for them is high.
The London conundrum
While rental prices have increased, London is one of the few areas that has seen rents depreciate. They fell by 4.7% over the past 12 months as people moved out of the capital. However, London still has the highest rental average in the UK, with typical rents amounting to £1,572 per month.
Now that the UK is opening back up again and people are returning to the office, demand in the capital is reaching pre-Covid levels. In June, rental averages increased for the first time in over a year with a 1.5% rise.
This points to an influx of people moving back to the capital and the market picking up steam again in the second half of 2021. The UK Bank of England has also predicted that the economy will rapidly recover as vaccines are rolled out.
A growing number of landlords
The stamp duty holiday, which was a direct response to the Covid crisis, actually increased the number of landlords in the UK. Pre-Covid, many were selling up, citing increased agency costs after the fallout from the Tenant Fee Ban, as well as more rules and regulations.
However, reductions to stamp duty saw many investors regain their appetite. In 2020, the highest percentage of investors since 2016 purchased properties. And in November 2020 alone, landlords accounted for 15% of completed property purchases in England.
Of the areas ripe for investment, it was the Midlands and the North that saw the largest uptake of buy-to-let homes, with investors diversifying their portfolio away from traditional hotspots. A record number of purchases were also in cash, suggesting that most investors were professionals who already have considerable capital in place.
2021 and beyond
While the stamp duty holiday ended in June, normality has returned to the lettings sector in major cities like London. And with the rental market in rude health, it sets the scene for a buoyant 2021and a healthy housing market in both the near and long-term future.