Demand from tenants bounces back
Demand for rental property rebounded by 30% in the first two weeks of April, after falling by 57% in the last two weeks of March, Zoopla’s Rental Market Report has found.
Seeing as the sales market was hit by a 70% fall in buyer demand, Zoopla suggested people were looking to rent rather than buy owing to the current situation.
Annual rental growth stood at 2.4% as of March, down from 2.5% in April.
Gráinne Gilmore, head of research at Zoopla, said: “The flexibility of the rental market is one of the key factors which has allowed activity to bounce back more quickly than other parts of the property market. The rise in demand in the first two weeks in April indicates that some tenants are already mapping out their next move.
“As with the whole housing market however, activity levels and rental growth will likely be closely aligned to the economic landscape of the UK once the lockdown eases and the immediate impact of coronavirus starts to recede.
“Rental growth has increased steadily for the last three years as demand has increased in the face of dwindling new supply. But, if the responses to COVID-19 contribute to a rise in unemployment, as some official bodies have forecast, this will reduce the scope for any additional growth in rents. We expect growth to moderate this year, but to remain in positive territory.”
The total number of properties listed for rent have only fallen by 3% since 1 March 2020, indicating that there has been no major withdrawal of listings.
Mary-Anne Bowring, managing director of Ringley Group, said: “The rebound in demand for rental properties in the first half of April underlines the defensive, counter-cyclical qualities of rental housing as an asset class.
“A subdued for sale market will likely see demand for rental homes grow over the course of the year, as buyers put off committing to purchasing a new home and sellers hold off owing to a dip in values and impracticalities of trying to sell when social distancing measures are in place.
“The big question is who is going to meet this rising demand for rental housing. Many buy-to-let landlords were looking to exit the market thanks to additional tax and more stringent regulation.
“Coronavirus will only have added extra financial pressure, especially for those who own their rental properties outright so cannot benefit from a mortgage holiday but potentially face tenants withholding their rent due to their own financial circumstances changing.”
Neil Cobbold, chief sales officer at PayProp, said: “The bounce in rental demand after an initial drop-off shows that renters are starting to look at moving options for when the lockdown period ends.
“While it’s positive to see that there has been no mass withdrawal of properties by landlords, the pause on sales and lettings activity may simply mean they don’t have many other options.
“In light of this, measures like the Coronavirus Job Retention Scheme will be essential to ensure that landlords can continue to receive rent despite the financial pressures caused by the coronavirus pandemic.”