Posted on: 01 July 2021
How will the housing market change due to COVID-19?
Estate agents, Hamptons, found that for the first time in 6 years, it is cheaper to rent a home than it is to buy.
In 2020, they conducted research that showed if someone was to buy a home with a 10% deposit, they would be better off financially than their renting counterparts. However, in the last month, they found that a private renting tenant spends, on average, £71 less in rent costs.
In this article, we will take a look at some of the reasons this shift has happened, and how it may affect property owners.
Why has renting become cheaper than buying?
Last year, research showed that it was cheaper to pay mortgage payments to own a house than it was to pay monthly rent, however since then, new research has shown that there are now only 4 areas of the UK that are cheaper to buy than rent; North East, North West, Yorkshire and Humber and Scotland.
COVID-19 has caused a climactic shift in the way we live our lives in the UK, with living arrangements being no different. Here are some of the ways that COVID-19 has created a change in the housing market.
Fewer people needing to rent
Because of COVID-19, many people lost their jobs, had to close businesses or have been placed on the furlough scheme. This hit people financially, and many people had to move back in with their parents or move into shared accommodation, leaving their rented or owned property to save on living costs.
As more people started working from home, they realised they could save money by moving away from city centres, which are predominantly areas that have higher levels of people in rented accommodation.
City centres are also hubs for leisure and social activities, but due to lockdowns, people were finding themselves unable to engage in such activities, making them an unattractive option for people looking to live somewhere with a good social life or access to leisure facilities.
What type of property do people want?
The BBC reported that the COVID-19 pandemic has changed the type of property that people are looking to live in.
According to the report, these are the most sought after properties:
|Two Bedroom Flat||Two Bedroom Semi-Detatched House|
|One Bedroom Flat||Two Bedroom Detached House|
|Two Bedroom Terraced House||Two Bedroom Terraced House|
|Three Bedroom Terraced House||Two Terraced Bungalow|
|Three Bedroom Semi-Detatched House||Three Bedroom Semi-Detatched House|
We can see here that pre-COVID, people were looking for smaller spaces, that would likely be convenient places to eat and sleep, with socialisation taking place outside. However, due to the COVID-19 pandemic, people may be looking for an extra room for an office or somewhere with a garden/outdoor space.
How will this affect landlords?
Loss of income
If you are having to lower the price of your rented property, then the most obvious knock-on effect is that you will have a decreased income from your property.
This is unfortunately something that you may not be able to negate, and you may just instead want to keep as much income as possible by keeping your prices affordable and competitive against other property owners.
Diversity of property
Because COVID-19 has changed what people are looking for in a property, your portfolio may no longer be of interest to people who may be looking to rent. As we mentioned earlier, what people are looking for has changed in the last year from flats to houses.
The only way to negate this risk would be to diversify your portfolio of property, which means you may need to invest in some new property that fits what potential tenants are looking for.
Guaranteed income schemes
If you are concerned about how COVID-19 has affected rental prices, you may want to consider a guaranteed income scheme, where you allow a letting agent to manage your property.
You will receive less monthly income than you would if renting the property out yourself, but you are guaranteed an income even if the property is empty.
Take a look at some of the pros and cons of a guaranteed income scheme, also known as a rent-to-rent scheme, here.
Property insurance with Premierline
Whether you decide to go with a rent–to-rent scheme or let your property yourself, it is vital to have a comprehensive landlord insurance policy to protect your investment.
Talk to one of the insurance advisors at Premierline, who will assess your business needs and compare quotes from some of the most well-known UK insurance providers.
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