Have we seen the end of the rent race?
As people flocked back to the cities when Covid restrictions eased, there was a surge in demand. But who won the rent race?
It seems so long ago now, but it was only a couple of years ago that people started leaving the cities during the various lockdowns of 2020. Faced with job losses and salary cuts and the flexibility of work-from-home, young professionals headed home to save money on rent.
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But when restrictions began to ease back to normality towards the end of 2021 and early 2022, there was a huge surge in rental demand thanks to many companies wanting employees back in the office on a regular basis.
Now that we are firmly into 2022 (where has the time gone?!), has demand slowed down or are we still living with the impact of Covid?
How did the pandemic change renting?
Towards the end of last year and into early 2022, tenants were regularly outbid on properties and were having to adjust their budgets and location in order to find somewhere to live. Many agents were seeing properties fly off the shelves in as little as 24hrs.
On the other hand, landlords had grown more wary and were now looking for financial security by:
- Raising rents. After the chaos of 2020/21, many landlord were increasing the rent
- Performing more checks. Worried about arrears, landlords began referencing more thoroughly before letting their properties
- Requesting longer contracts. Great tenants on longer contracts are the dream for landlords
As well as the pandemic, many landlords sold up during the stamp duty holiday or because of changes to tax laws, while others converted to holiday lets, further shrinking the pool of available properties.
What lessons have landlords learned?
While it’s understandable that landlords are nervous after the pandemic, it’s worth considering the impact of increased rent and longer contracts on tenants.
Increased rents can positively impact your income in the short term, but with tenants currently spending about 42% of their income on rent, if this upward trend continues, it may soon become difficult to find tenants. It may also be difficult to hold onto them, especially as flexible working continues to be the norm, meaning they can choose to live somewhere cheaper.
Longer contracts may provide you with peace of mind on the day of move-in, but might prove a nightmare in the future if your tenant wants to move before the end of the tenancy. No one wants a tenant who doesn’t actually want to be there, so consider a more reasonable shorter break clause, so everyone is happy.
How can landlords protect themselves going forward?
Now that the frantic flurry of house-hunting has calmed down, it’s time to consider the best ways to look after your investment:
- Rent Guarantee Insurance. If Covid left you with a fear of rent arrears, investing in RGI is your best assurance
- Cut your costs. Every penny counts, so use our free Expense Tracker to track what and where you’re spending, so you can save money where you can. Listing with Mashroom is a free way to find your tenants, so sign up with us next time you’re on the hunt!
- Tenant Referencing. Landlords are taking more care about referencing potential tenants, so don’t let this habit slide! You’ll also need to have a thorough reference if you want to get RGI
- Deposit Replacement. Offer your tenants the chance to spread the cost of moving and get yourself 12 weeks cover instead of the usual 5 with our Deposit Replacement. This takes the financial burden off your tenants, meaning they’re less likely to struggle with money during their tenancy
It’s easy to forget just how tough the last couple of years have been, especially now as life is basically back to normal. But don’t forget the lessons we all learned during the hard times – they can protect you against unforeseen issues in the future.
