A new analysis reveals three key figures that suggest the rental market will bounce back from the lockdown and the Coronavirus crisis rapidly - and faster than the sales market.
In an article exclusively for Letting Agent Today, the head of research at Zoopla - Gráinne Gilmore - explains that while activity in the rental sector has been significantly hit by the virus, the damage done is arguably less severe than some observers suggest.
Here is Gilmore’s piece in full:
The three key facts in the rental market
Interest in the housing market is nothing new, as any agent who has been cornered at a party (remember those?) to be quizzed about a fellow reveller’s house value or rent rise will know. But the demand for real-time data to inform thinking on the market has never been greater. As shown in the latest edition of Zoopla’s Rental Market Report: while the rental sector has been affected by COVID-19, it hasn’t been affected to quite the same extent as the sales market.
There are three key figures which help explain the latest trends in the lettings market:
Demand from tenants fell by 57% after March 7th, when the impact of Coronavirus began to be felt. This compared to a 70% decline in the sales market, and illustrates how the flexibility of the rental market has helped its resilience, especially after the lockdown. Demand stopped falling at the end of the month, and has risen by 30% since then.
However, when we compare these levels of demand to those seen last year and in 2018, the metrics are a more modest 20% lower, highlighting the seasonality of the rental market, with this being one of the relatively quieter times for activity.
What we also wanted to examine was the nature of this demand, and the price brackets in which it was focused. Across the UK, the price brackets where demand is clustered remains largely unchanged compared to the pre-COVID-19 period.
In London, what we saw was a slight shift downwards in the clustering of demand from properties to rent priced at £1,400 - £1,500 a month (where the largest purple line is below, showing the highest levels of demand in late February) to those priced at £1,200 - £1,300 (largest orange line below, showing the highest levels of demand in early April), which could be a signal of the current financial conditions. We will keep monitoring this trend.
We expect that once the lockdown eases, activity will pick up relatively quickly, given that the new index shows that the average time between listing a property and letting it out was 17.7 days (reflecting the more normal market conditions of early March), compared to the sales process which can take 2-3 months.
If the lockdown eases in time for the seasonally more busy times in the summer and early Autumn, rental activity levels could match those seen last year. However, this would still mean that there have been 25% fewer moves in the sector compared to historical norms, given the very quiet April and May.
Rental deals are still happening, with agents, landlords and tenants organising remote viewings and flexible moving in dates.
In terms of rents, the Zoopla’s rental index shows that average rents across the UK remained broadly unchanged in March, down marginally to 2.4% from 2.5% in February, but up from 2.3% in December. These index figures are unlikely to reflect the full impact of COVID-19 however - this will become evident in Q2 figures.
The flexibility of the rented sector will mean it bounces back more quickly once the lockdown restrictions ease. Stay updated on all the latest data on the lettings and sales market at https://advantage.zpg.co.uk/