UK Property Letting Market is Optimistic
New reports and surveys published recently show optimism about the UK lettings market.
Despite challenges of various sorts, including the latest Covid surge, letting agents are feeling good. After all, activity is up and buyers and renters are on the move with their new work at home arrangements. And many more are looking to leave inner-city London.
At least, the UK rental market appears promising for rental property investment and property managers outside of London. See more on UK rental prices and what is supporting the UK rental market below.
“Rents are on the decline overall in Greater London – down 5.2 per cent annually – whilst rising across the rest of the regions” said Home.co.uk’s Doug Shephard. Across most of the rest of the UK, however, there are “soaring rents and falling supply.” from report on lettingagenttoday.co.uk.
It seems so long ago, last April, that optimism about the property market sunk very low. Knight Frank recorded a 57% drop in sentiment back then. Yet as the worst of the pandemic has passed and UK landlords have discovered ways to cope, optimism is growing.
Yes, this fall’s rise in Covid 19 cases is a concern and is scaring off some property buyers, yet that reluctance will keep many renters leased until more affordable homes are available to purchase.
UK Property Market Outlook
Of course, we can never separate the lettings market from the property sales market. Home prices and availability will impact the prices of flats and homes to let and consequently rent prices. This fall’s forecast for UK property market is positive and housing economists are giving a positive forecast for 2021. The temporary Stamp Duty holiday with lower interest rates is spurring house buying activity.
UK house prices rose by 5% in September to £226,129. That is an increase of 0.9% month to month in September, after rising 2% in July. Commuter towns outside of London saw big price increases of 5%. And average prices within London hit a record high of £480,857 in September.
“Housing market activity has recovered strongly in recent months,” Robert Gardner, Nationwide’s chief economist, said in the report. Mortgage approvals for home purchases totaled close to 85,000 in August, he said, the highest level since 2007 and well above the monthly average of 66,000 in 2019. — from Mansion Global report.
Savill’s Property Market Forecast
Savills UK has forecasted a rosy outlook for property values in the years ahead, and given the shortage of rental homes in the UK, it stands to reason that rental units will be priced well in 2021.
However, as rosy as the new outlook is, letting agents are expressing concerns over collecting overdue rent, and about how their business will operate going forward.
What is Bolstering the Letting Market?
What is present in the letting market that will make property investors and letting agents happy?
- end of shutdowns is leading to more people returning to work which means rent can get paid
- home prices rising too fast and too high so people continue to rent
- asking rents outside of London rising fast – Liverpool (+12.1%), Sheffield (9.4%), and Surrey (8.9%)
- there are big opportunities in outlying regions and towns in house rentals
- some savings on the total amount of stamp duty payable
- landlords are intending to buy more buy-to-let properties
- the thought that the worst of the Covid 19 pandemic may in the rearview mirror
Yet, as winter approaches, the risk of shutdowns and a rise in Covid 19 infections is elevated. And in April, the return of the stamp duty, which will hasten purchases of homes and rental properties before that deadline.
“Moreover, the looming stamp duty surcharge of two percent for non-UK residents will hit in April 2021, and therefore we expect a surge of such purchases over the coming months in order to beat the deadline.” — from lettingagenttoday.co.uk.
As we know from the USA, Australia and Berlin reports, lettings management is becoming more challenging, from cash flow and rent collection, to compliance, more is expected, often with thinner operating margins. This can strain optimism.
See more of the UK rental property forecast.
It may be that most UK letting agents don’t have the control, automation and compliance tools to tame the complexity everyone is facing in managing accounts, financial transactions and tenants. That will call for a completely different type of property management software. Compare the possibilities.
Survey of Letting Agents in the UK
Goodlord recently published a survey of 350 landlords to gauge their sentiment about the market and 80% reported feeling confident. This is despite the despair of the last 6 month, pandemic period. And only 1% reported feeling pessimistic about the outlook.
However, with void periods up a little to 18 days, there’s plenty of reasons for skepticism too.
Migration from High Density for More Living Space
If you’ve read our UK property market report, and US housing report, you can see the transition in residential property markets, as workers and some businesses entertain moving away from urban locations to the countryside for more safety, lower costs and more room for work at home arrangements. It’s the same in all property markets from Australia to the USA.
Over half of the Goodlord survey of letting agency respondents reported feeling very positive about the future of their company. Most felt they would have the resources to get through this tough period.
Compliance a Troubling Concern
What did concern UK letting agents was the matter of compliance, describing it as difficult. The UK government is enforcing compliance mandates which will include fines or business loss if not met.
The government is asking letting agents to take care of transaction recording and reporting on unusual activity, checking account access, doing sums, trial balance reports, along with compare and contrast deposits. The goal is to catch fraud that may have happened during the pandemic period.
Check and void period management were issues that came next in worry. Letting agent respondents have gained a greater appreciation for property technology it seems. Fully 16% more feel technology and automation will be good for their businesses.
Of course, secure, anywhere anytime software access, automation, and data security solutions will aid letting agencies in meeting compliance requirements in the UK. ManageCasa property management software is an all in one solution for letting agents.
Check out ManageCasa’s Amazing Features Now
Rent Prices Growing Outside of London
The migration trend is out of inner-city London. Rental inquiries are down substantial there and with the end of government aid, a new layer of challenge is presented for property managers. And without foreign students, the lettings market in London is experiencing more vacancies.
For landlords, rent price growth is healthy and is likely to support new rental construction outside of London.
The average rent in the UK is now £987, up 0.2% on last month, and 2.1% on last year. When London is excluded, the average rent is up .4% to £828 over last month, and 3.9% over last September 2019.
Across the UK, outside of London the average monthly rent in September reached £828, an increase of 0.4% over August, and 3.9% over September of last year. London bucked the national trend with its drop in letting prices. The average rental value for new tenancies in London is £1,646 a month. Year over year, London rent prices have fallen 2.8% compared to last September 2019.
Rent prices in London have consistently been £700 higher in London than outside the city.
Will home prices and rent prices continue their relentless rise and thus justify letting agents burgeoning optimism?
See more on the UK property market outlook and changes in rental prices during 2020 with forecasts and predictions for the UK property market.
Additional Property Management Resources for UK property managers:
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