Despite the challenges faced in 2020, the first quarter of this year saw some buoyancy in the rental market, with more opportunities for buy-to-let investors.
Rents across all UK property types increased overall during the first three months, according to the Deposit Protection Service (DPS). London rents rose for the first time in more than a year.
Some of the most significant changes in the rental market have been an increase in popularity of properties with an outdoor area or more indoor space, and a move away from city centres as part of the so-called space race.
According to the DPS’s recent survey of around 1,300 tenants, homemoving trends during the second half of 2020 can also be defined in part by age. The proportion of older tenants (60 to 75) living in rural areas increased by 9%, while the proportion of younger tenants (18 to 35) in towns rose by 5%. There was a significant drop in the proportion of 18- to 22-year-old renters in rural areas.
The survey also showed an increase in popularity of terraced, semi-detached or detached houses compared to flats. We too have detected this trend in the work that Zephyr has undertaken with brokers and landlords recently.
‘Permitted development’
Nevertheless, we believe forthcoming changes could affect these recent patterns.
As professional, limited company investors look to diversify portfolios with different property types in higher-yield areas, it’s worth considering how a shift in policy towards ‘permitted development’ and potential changes to planning regulations will affect buy-to-let purchasing trends.
Just before the Easter break, the Ministry of Housing, Communities & Local Government said that, from August 2021, any works to convert buildings from commercial, business or service use to residential use in England would not need planning permission. Supporters believe the changes will address the effect that the pandemic has had on the high street, particularly the anticipated, long-term reduction in demand for workplaces in urban environments and the acceleration in demand for online retail.
How the permitted development rules will impact the market in the second half of this year is not clear. The intention is to enable the conversion of buildings into domestic property, which is likely to affect both supply and demand.
The DPS’s survey data suggested that many people who had moved during the pandemic did not move far, with the majority saying they now lived less than 10 miles from their previous home. On average, just under half (47%) of tenants had moved five miles or less, with 18% moving between five and 10 miles. Could these short distances mean that tenants who have left urban areas are more likely to move back if the right property becomes available under the new rules?
Covid recovery
Whatever the overall buoyancy of the market, parts of the sector are faring differently, and the ongoing pandemic and related policy issues could still have an effect. The stamp duty holiday was due to end on 30 June, with the furlough scheme finishing on 30 September.
However, with summer in the air, people moving and the careful lifting of restrictions, everyone is trying to get back to some form of normality and there are reasons to be hopeful. In our recent landlord survey, more than a third of respondents said they had bought or intended to buy another buy-to-let property, often as a long-term investment or to diversify their portfolio. Many also cited the opportunity to buy at a discount.
Some challenges remain for landlords, brokers and lenders, but there is also plenty to be optimistic about.
Paul Fryers is managing director of Zephyr Homeloans
