UK Rental Market: Demand Soars In City Centres
Throughout the COVID-19 pandemic, we saw a sharp decline in rental demand in city centres. However, in recent months, demand is beginning to soar again. Especially as lockdown restrictions have officially been lifted, tenants are wanting a return to city life. So, what does this mean for buy-to-let investors?
A drop in demand during lockdown
At the beginning of COVID-19, location preferences and buyer trends changed dramatically. As more people worked remotely, tenants began to search for homes with more office space and outdoor amenities. Professionals lost the desire to live in the city centre. Prices are steeper, and without the need to travel to work, paying more to live in the city centre seemed unnecessary. Many tenants decided to move further outside of the city centre, to areas with more outdoor space. Instead, demand soared in commuter towns.
Buyer trends are constantly fluctuating. The biggest benefit of renting is that it’s much easier to move around to suit your changing preferences. Therefore, as city centres open back up again, tenants are beginning to flock back.
Also, for the majority of lockdown, hospitality venues were closed. For the younger rental market, living close to the action is a huge selling point for city centre accommodation. With hospitality venues closed and offices shut, the city centre streets were deserted.
Another huge factor for the decline in demand was that universities remained online for the majority of the year. Students were able to attend university remotely, meaning there was no need to live in such close proximity to campus. Lots of students, especially first-year students, stayed at home for the majority of the year. Many first-year students chose not to move into their flats due to COVID restrictions, or they chose to defer a year. First-year students make up a large percentage of the buy-to-let market, meaning rental demand was not at its peak. However, as of autumn, students will be returning to campus. We can expect to see a huge influx of demand as term begins again and students make their way back to the city centre.
Why is rental demand now soaring in city centres?
As of Monday 19th July, lockdown restrictions were lifted. For professionals, this means a gradual return to the office. It also means the opening up of hospitality venues, so we can expect city centre nightlife to make a comeback. Slowly, we are beginning to see our city centres fill up again. Naturally, city centre living has become more appealing and demand has started to rise.
Additionally, many city centres saw rental prices decline throughout lockdown. Especially London, which saw a 13% decrease in prices. In certain areas of the capital, this figure reached 22%. Therefore, for tenants wanting to move back to the city, now is an ideal time. Prices are at their lowest, so it would be wise for tenants to secure a property now before the inevitable boom in prices. The same goes for investors, who may be able to get a lot more for their money whilst prices are low. As we can see demand increasing, investors are likely to get a much higher ROI if they choose to invest sooner rather than later.
On top of this, house prices are skyrocketing. As a result, for the first time in six years, renting has become a cheaper option than buying. Previously, renting has been seen as the more expensive option. But, with rising house prices showing no sign of slowing down, renting has now become a more affordable option. Tenants are choosing to stay in the rental market for longer. Therefore, demand is remaining strong for rental accommodation across the UK – which is great news for buy-to-let investors. As long as demand remains high and supply remains sparse, we can expect this trend to continue.
With house prices reaching new heights over the last year, it’s becoming harder for those wanting to buy their first property. On top of that, the UK is still in a period of economic uncertainty. Therefore, many buyers may choose to hold off a purchase until they are sure they can comfortably afford it. As a result, they will stay in the rental market for much longer.
This high level of demand, coupled with limited supply, will continue to strengthen rental growth in city centres. Generally, the summer is an active period in the buy-to-let market. Most tenancies end and tenants begin to move into a new rented property. With restrictions being lifted and the vaccine roll-out well underway, it’s expected we will see plenty more tenants moving back to the city centre. Coupled with the current affordability of prices, demand in city centres is well on its way to returning to the pre-pandemic levels. As a result, for buy-to-let investors, the city centre remains a prosperous investment choice.
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