The past year has morphed the rental market in many ways. Tenants left cities due to the UK’s lockdowns, and growing rent arrears clouded the rental market. Now, the outlook looks sunnier as tenant demand continues to increase in cities across the UK like London. With restrictions now lifted in London, workers returning to the office, and continuing vaccination rollouts, tenant demand is rising in one of the busiest periods of the year as the market begins to recover.
The growing tenant demand figures
London took one of the worst hits in the rental market during the pandemic. Several landlords had to lower rent to earn some income due to tenants’ job and financial security uncertainty. But now, with lockdown restrictions easing, tenant demand is growing. From June 2021, tenant demand now averages at 30%, a 4% uplift from June 2020. London saw the most significant increase in rental demand at 15%, according to Barrows and Forrester. Demand in city centres is rising, meaning landlords could see increasing rental yields.
London boroughs such as Kingston upon Thames, Hammersmith, and Fulham have seen a healthy increase in tenant demand at 11% annually since June 2021. However, several boroughs have declined. Croydon is down on -6% for tenant demand this year, alongside Waltham Forest, Hillingdon, Havering, Lewisham, Haringey, Enfield and Newham. These areas are based further from commuter towns, suggesting why tenant demand has decreased in these areas.
According to the RICS UK Residential Market Survey June 2021, London sees strong tenant demand with supply increasing, though there is a lack of tenants from corporate companies. Low tenant demand is likely due to increased numbers of people working from home and reduced office space use. Wales has also seen healthy demand, though, is facing a property shortage, with few available properties to let. In St. Andrews and Edinburgh, Scotland sees high tenant demand with students looking for accommodation and seasonal employment still being touch-and-go.
How COVID-19 has changed renting
Though tenant demand is slowly returning to major UK cities, they aren’t coming without some new conditions in mind. Since lockdowns prevented people from going to the office, the frequency of professionals working from home increased. Most opted to move out of cities and led to a new realisation of what tenants want from rentals.
Celyn Evans, Business Support Manager of James Douglas, explained the new trends in the first interview of our new series of Agent Insights.
“People want to tailor their homes after the pandemic’s effect on them. For example, either down-sizing, being on furlough, looking for a place with outdoor space or a study to accommodate home-working. Equally, due to COVID, we have also seen an increase in renewals. Tenants are enjoying the flexibility of renting a property and are looking to stay put due to the additional restrictions faced with moving home.”
Though London and other major UK cities are opening again, many are still interested in working from home. Hence, several tenants are now looking for properties that can accommodate this. Though the demand for city-centre properties is rising again, gardens and outside spaces are also becoming popular.
Tenancy flexibility and renewal
Another shift in what tenants are looking for in the rental market is flexible tenancies and contracts. An assured shorthold tenancy (AST) have a fixed tenancy term (usually between 6-12 months). They can also be periodic, where the tenancy rolls on with no set end date. Tenancy renewals and flexibility are fast becoming popular for those wishing to stay longer than 6-12 months. Other tenants, however, enjoy the flexibility of renting, preferring to stay in a property for shorter than their fixed-term periods. This is more common as people return to the office and cities, so tenants may prefer a periodic tenancy.
If, however, this happens in a fixed-term tenancy agreement, break clauses are helpful to have. You can set the conditions as a safeguard for both you and your tenants. Condition examples may include that tenants can end a tenancy after so many months if you give a month’s notice in advance.
Flexible tenancies, however, are essential to think about in the changing climate of the rental market. Offering flexible tenancies will meet the growing demand of the rental market and reduce the frequency and length of void periods.
The future of the industry
With the rental market now starting to recover, we can expect to see market growth. Interestingly, recorded by UCAS data, there was an 8.4% annual rise in university applications with a 17.1% increase in applications from countries outside the EU. International students are more likely to live in PBSA than students living in the UK, increasing demand and market recovery. With some universities keeping on digital lectures for the possibility of blended teaching styles, it’s unknown what the future is like for the student accommodation market and student tenants renting privately.
The student rental market is slowly recovering, but the recovery comes with changes in what tenants want from their homes. Bigger outdoor space, studies for remote working options, and flexible contracts as they rent. It will be interesting to see the changes landlords and agents may implement in response to growing tenant demand.
Want to know how to secure the right tenants in the peak period of tenant demand? Check out this blog post here. If you’re interested in what Resooma can do for you, check out how you can list your property and manage your bills with us.