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Rental market rides shutdown storm

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Demand for rental property has already bounced back from the initial shock caused by the coronavirus crisis, the property website Zoopla has reported.

Its first quarter report for 2020 recorded an initial 57 per cent fall in demand as the initial impact of coronavirus was absorbed. But this was followed by a 30 per cent rise in demand in the first two weeks of April.

Although still down on last year, ‘the decline in rental market demand has now bottomed out’, Zoopla declared. ‘This tallies with the flexible nature of the rental market, with activity falling less severely and rebounding more quickly than in the sales market after financial or economic shocks’.

Zoopla reported a ‘surge’ in new rental listings just prior to  the coronavirus crisis ‘as landlords in some cities moved homes from the short-let market to the long-let market’.

Since the lockdown there has, unsurprisingly been a fall-off in new listings although ‘the total number of properties available to rent remains broadly unchanged as there has been no large-scale withdrawal of listings’.

Once lockdown restrictions ease, activity levels are likely to rise, said Zoopla. Even so, the number of rental home moves taking place during 2020 as a whole will be a quarter fewer than in 2019.

Property searches suggest that outside London properties with rents of between £500 and £600 per calendar month are most in demand – with little change dues to the coronavirus crisis detected.

‘By contrast, Londoners appear to be looking for cheaper homes to rent. The most online interest was in properties with rents of between £1,200 – £1,300 pcm in April, compared to February when most interest was in properties priced between £1,400 – £1,500 pcm’.

This change, said Zoopla, could be a reflection of renters’ changed financial circumstances ‘it is premature to conclude whether this trend will persist’.

Unsurprisingly, the rate of rental growth flattened in March, but is likely to be ‘moderately positive’ for landlords during the rest of 2020, said Zoopla. 

Overall rents were up 2.4 per cent in March, compared to 2.5 per cent annual growth in February.

‘Despite the slight slowdown in growth, rental growth has been on a largely upward trajectory since March 2017 as demand for rentals increases and supply shrinks. But rental growth in London, having risen strongly since March 2017, eased in April 2020, with 1.7 per cent annual growth, down from 2.3 per cent in February. 

“The flexibility of the rental market is one of the key factors which has allowed activity to bounce back more quickly than other parts of the property market. The rise in demand in the first two weeks in April indicates that some tenants are already mapping out their next move.

“As with the whole housing market however, activity levels and rental growth will likely be closely aligned to the economic landscape of the UK once the lockdown eases and the immediate impact of coronavirus starts to recede.

“Rental growth has increased steadily for the last three years as demand has increased in the face of dwindling new supply. But, if the responses to COVID-19 contribute to a rise in unemployment, as some official bodies have forecast, this will reduce the scope for any additional growth in rents. We expect growth to moderate this year, but to remain in positive territory.”