Almost 70% of agents reported increased demand for rental properties during a tough year. What lies behind it?
For one thing, the general migration of office workers to remote working has put home space at a premium. In addition, the unexpected freedom of no longer having to commute – potentially for the foreseeable future – seems to have driven demand towards the commuter belt and rural locations where rent money goes further.
The increase in demand further explains why 57.1% of agents expect landlords to increase rental prices for the next year.
Tenants’ resilience is tested, landlords remain committed
How did tenants cope with 2020’s challenges? Mirroring the quantitative data of PayProp’s last Special Report for 2020 offers, the Rental Confidence Index offers plenty of qualitative data that supports optimism.
Even under the difficult circumstances faced by tenants, only 30.1% found it more difficult to pay the rent, and just 11.2% are concerned or very concerned about arrears. This is a welcome early indication that most tenants will keep paying rent on time in 2021.
But how have the 30% of struggling tenants managed to continue paying? Data from the latest Household Finance Index published by IHS Markit suggests people have been using household savings to cover expenses, possibly due to a loss of income after being furloughed or made redundant.
As a result, household finances are under more strain than they have been at any point over the past six months, and household savings have fallen at their quickest rate in seven years. As we head into 2021, the number of tenants worried about arrears may increase if savings continue to diminish.
Supported by improved arrears figures from recent months, PayProp’s Rental Confidence Index suggests landlords are generally confident about tenants’ ability to pay rent – with only 26.2% concerned about arrears and 16.6% worried about regaining possession of a property.
Even though there seems to be a knock-on effect on the appetite of landlords to add to their portfolio, 62.2% still expect to be active landlords in five years’ time.
Enough industry support?
We asked landlords, tenants and agents if they felt the government had provided enough support for the private rented sector, and the answer was a unanimous no.
While these schemes have allowed agents to remain open during lockdown and instructed the market to provide mortgage holidays to landlords if required, alongside eviction bans and furlough payments to support tenants, this has not been enough for most of those surveyed.
The stats also showed that a relatively high number of agents (24.5%), tenants (38.4%) and landlords (39.9%) were unsure if the support was enough, but this could be down to a lack of clear communication from governments and local authorities.
What to expect from 2021
Lettings and estate agencies were considered a key industry in 2020 and hence given permission to open earlier than many other businesses. As a result, companies had to adapt quickly to the ‘new normal’ and did so by leveraging technology.
During 2020, over two thirds of agents (77.6%) increased the use of technology in their businesses and 57.1% believed technology will add value to their businesses in 2021. While 63% of agencies surveyed had their full teams back in the office, 16.3% expected some colleagues to continue to work remotely. Presumably, this means technology that was widely pioneered during 2020 has allowed them to be just as productive from home as in the office.
Thanks to home working and lockdowns confining the general population to their homes (with the exception of essential activities), tenants are spending a lot more time at home. One key demand we expect from tenants in 2021 is for properties with gardens. Of the 32.7% surveyed who don’t have access to an outdoor space, almost 90% would have wanted it during 2020. Tenants also don’t seem to be afraid of moving to get it, with only 14.9% put off moving properties because of COVID-19. Most tenants (55%) surveyed also expect to still be renting in five years’ time.
This is good news for landlords, as the majority (62.2%) still expect to be landlords in five years’ time (see above). For the 39% of landlords looking to add to their portfolio, the change in tenant demands will be well noted.
With a vaccine rollout beginning and the UK government hoping that restrictions can start to be lifted towards the middle of the year, things will get better. Ours is a resilient sector, reflected in 83.7% of agents saying they’re likely or very likely still to be working in the property industry in 2025. The lessons learnt in 2020 during one of the worst economic shocks in 300 years will stand property professionals in good stead for the future.
To access PayProp’s review of 2020 and the full set of data and insight from our survey, together with tenant arrears data for the year, download your free copy.
*Neil Cobbold is Chief Sales Officer at PayProp