Strong prospects for UK landlords
- Published: Tuesday 19 January, 2021
- By: Commercial Trust
Andrew Turner, Chief Executive of Commercial Trust, comments on the future of the UK buy to let market.
The impact of COVID-19
Whilst it is clear that the Coronavirus pandemic has had a devastating impact on the job market and industries across the globe, I remain confident that the UK buy to let market will hold strong.
Fundamentally, housing unpins the entire UK economy, so we have seen to date that the government has done everything it can to keep the housing market moving amidst lockdown.
Un-met house building targets and the impact of the pandemic on employment will result in a new wave of demand for rental properties.
For this reason, the landlord community will continue to be a much-needed resource to the people of the UK.
Successive governments, regardless of the party at the helm, have struggled to build the necessary number of homes the country needs.
This means that, in the longer term, housing prices will continue to rise.
Given the state of the economy, incomes are unlikely to bridge the gap in housing affordability in the next couple of years.
As such, the private rental sector serves an important role in keeping people in homes.
First time buyers
It is unfortunate that any downturn in the job market affects those at the lower end of the salary scale the most. This will inevitably impact a great deal of hopeful first time buyers.
These individuals will need to rely on the private rental sector for some time to come.
Students and HMOs
Student housing, whilst taking a small setback due to the progression of remote learning, will eventually have a surplus of students requiring housing in future years. Deferred entries may contribute to this.
Communal spaces are a cause for concern at present to some student renters, but, there is sometimes no alternative. Single occupancy dwellings often hold a price tag that is out of reach.
Another direct result of the pandemic is the boom in the holiday let market. Many families – outside of lockdown – have opted to take local or regional trips in place of their usual summer holiday abroad.
It is likely that the impact of the pandemic will result in a skyrocket effect on the popularity of ‘staycations’, with an impact far beyond the lifting of travel restrictions.
When the exodus to home working began, our business was lucky to make the transition highly successfully in a short space of time. Three hundred employees in our group were set up at home within four days.
At this time, the picture seemed clear – that homeworking would be the new default position.
However, in the months since, I am now convinced a blended dynamic is the most likely outcome.
Whilst it often provides greater flexibility and increased personal safety, there are also challenges which cannot be overcome.
The reduction in social aspects of work have affected many people across the UK. Working from home can feel isolating for some. Not everyone has adequate space to comfortably go about their day. Conversely, shared living space does not always lend itself to concentrating on work.
There are other functions of work that are just easier in person, training and managing staff remotely is not always ideal.
Of course, many jobs simply cannot be done from home.
Aside from the ability and desirability to work from home, city living has a number of significant ‘pull’ factors that remain unchanged.
Cities offer an array of facilities, resources, transport links, and social and cultural pursuits – as well as employment opportunities – that will prevail.
For these reasons, cities will remain popular places to live.
The switch to home working led to new uses of technology.
The rental market appears to have also adapted, tenants are now open to the idea of “virtual viewings” using static 360 cameras, or a video walkthrough.
These changes, whilst at first were hurdles to overcome, are likely to outlive the pandemic, meaning it may be easier for landlords to fill vacant properties, or even contact prospective tenants.
The true impact on unemployment will become clear after the furlough scheme ends – currently set to be in April.
Nonetheless, the impact of Covid-19 on unemployment is likely to drive an even greater reliance on the private rental sector than ever before.
Alongside demand, a key factor for landlord investors is the cost of borrowing.
As I write, The Bank of England Base Rate is 0.1%, and has held at that rate since March 2020.
Given the cost of borrowing is a key stimuli to consumer spending and economic recovery, the government will have to be very careful with their control over interest rates.
I expect borrowing to remain cheap for some considerable time as a result.
Landlord housing is a much needed resource, I can only see a path ahead that propagates that need.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.