Landlords ditching short-term for longer lets as rents fall
Hamptons International has seen landlords changing their business focus from short to longer-term lettings as a result of the coronavirus and warned rents could fall by up to five per cent.
The estate agent said it had found the changing tenancy length trend through its business as it published its latest monthly lettings index, which also revealed falling rents and lower demand as movement restrictions started.
“Some landlords who typically let their properties as short-lets decided to let their properties on a longer-term basis, and this has partly driven the increase in the number of homes available to rent,” it said.
“An overall increase in supply combined with a reduction in demand suppressed rental growth on new lets in March,” it added.
Rents falling up to five per cent
Hamptons International head of research Aneisha Beveridge said the first signs of the Covid-19 effect on the rental market were starting to show.
“Tenants’ concerns about their future income prospects combined with greater risk of void periods for landlords willing to advertise their property on the open market, resulted in the rent falls,” she said.
“London, where tenants’ incomes are more stretched, recorded the biggest fall in rents.”
Beveridge added that once lockdown restrictions ease, the firm expected activity levels to rise.
“But although demand for rental accommodation is set to increase, and there are already signs of it picking back up again, the longer-term economic damage to people’s jobs and incomes means that rents on newly let properties are likely to fall between two and five per cent this year,” she continued.
Renewed tenancy rents fall
Overall, the index showed the early material impacts in March as rental growth more than halved across Great Britain on new lets while renewed rents fell by 0.5 per cent – the biggest fall since February 2014.
There was also a fall of new applicants registering to rent a property by a third compared to a year earlier.
With more tenants staying put as a result of the Covid-19 lockdown Hamptons added that renewals data now provided a better representation of rental growth than changes on newly let properties.
Seven out of 10 tenancies that were due to end in March were renewed, the highest level recorded in any March since 2008 when 77 per cent did so, although the figure has hovered around 67 per cent since 2009.
Rents on renewed tenancies fell most significantly in London, with the capital recording its biggest year-on-year fall of 2.2 per cent.
The agent warned that London tenants’ incomes tend to be among the most stretched and were therefore more vulnerable to income shocks.
The South East, down 1.4 per cent, and East, down 0.4 per cent, were the other areas to see renewed rents fall.
In contrast, Scotland posted the strongest rental growth at 3.4 per cent, with the Midlands and the North also seeing rises of two per cent and 1.6 per cent respectively.
Demand for rental accommodation decreased over the course of the month as lockdown measures were enforced.
The number of new applicants registering to rent a home fell by 31 per cent in March compared with the previous month – a time of the year when applicant numbers tend to rise, Hamptons noted.
“However, there are signs that applicant demand is starting to increase again, after bottoming out at the end of March,” it added.
The stock of homes available to rent increased in March with 11 per cent more available to rent than in February, although the supply of homes available to rent was still down year-on-year.
Wales and the Southern regions, including London, saw the biggest increase in the number of homes available to rent.