Research from our Q1 Rental Index, and a recent Lockdown survey of franchisees, provides an insight into the changing world of tenant demands. In this article we will talk about the effect Lockdown has had on the housing market, and not surprisingly, how the demand for outdoor space has become more of a priority.
The Belvoir Q1 Rental Index was prepared for us by industry expert Kate Faulkner, who began by looking at a breakdown of rental trends by property type. The results confirm very different rental trends between flats and houses with flats not being as popular as houses, particularly in areas where there is an oversupply.
Most Belvoir offices are predicting increasing demand for properties, with houses being more popular. People have experienced the benefits of being able to enjoy an outdoor space during lockdown, or indeed missed out on outside space and demand for properties with gardens is predicted to increase. Demand for HMOs (House in Multiple Occupation) is likely to remain fairly stable or could fall. Prior to lockdown over half of all Belvoir offices reported unchanged rents compared to Q4 2019. Most offices had anticipated a rise in rents in 2020, with wages expected to rise in excess of inflation, but of course this is now unlikely to happen. A total of 53% of offices reported unchanged rents for flats in Q1, with just over 38% reporting increased rents compared to Q4 2019. On reviewing trends for houses, 50% reported static rents, and just over 44% recorded increases, with just 6% reporting falling house rents. Overall, demand for houses remains slightly stronger than for flats.
All Belvoir offices received tenant enquiries during lockdown, with the main reasons being due to a relationship breakdown, a need to downsize, or to obtain more outdoor space. The majority of tenants were looking for two-three bedroom properties. Essential house moves and moves for key workers were allowed during lockdown and 88% of offices managed to conclude lets during this period. 12% of offices recorded no lets during lockdown. A total of 80% of offices surveyed reported that they had between 1 and 10% of void properties during lockdown, but most offices are seeing a gradual increase in business now that restrictions have been eased.
Over three quarters of Belvoir offices reported zero evictions in Q1 – the highest recorded level since the survey began in 2016. The vast majority of offices (93.5%) reported no problems for their tenants with the eviction extension from two to three months and any problems that did occur were due to an inability to respond to anti-social behaviour, accrued rental arrears, this has meant some landlords have been unable to move back into their own property.
During Q1, there was an increase in the number of offices reporting landlords selling no properties, from 4.5% in Q4 to 20.5% in Q1. There was also an increase in the number of offices reporting landlords selling up to three properties from 56.5% in Q4 to 67.5% in Q1. The main reasons for landlords selling their properties was to free up money, move back into a property or as a reaction to increased regulation and taxes. Where offices did report landlords buying new stock, this was predominantly for two or three bedroom properties.
Impact of Lockdown
When we looked at the impact of lockdown, our offices reported that the main challenge to their local market was a dramatic slowing of business. Offices were able to show properties via video/virtual tours so the importance of PropTech increased dramatically, with viewings being extremely limited. Demand remained strong during lockdown, but our franchisees reported that they were only receiving enquiries from tenants who were very serious about wanting to move.
Looking ahead, three quarters of all offices surveyed predict that the market will be busy after lockdown, and there could well be a boom when the market fully opens. Properties with outdoor space and rural outlook are likely to be at a premium in the post lockdown market. In these turbulent times the role of letting agents is more important than ever, as we work to provide landlords with the protection and support needed during lockdown and beyond.