The number of tenants looking for rental properties in city centres is on the rise following a decrease throughout the COVID-19 pandemic. What does this mean for the UK rental market?
Location preferences changed for tenants at the beginning of the COVID-19 pandemic, impacting the UK rental market. As many professionals worked from home, tenants could look at renting in different locations. Many were interested in areas where they could get more space and have quieter surroundings to suit their new work-life balances and adjusted lifestyles.
Tenants returning to city centres
The pandemic caused a drop-off in demand for UK rental properties in city centre locations. This led to a rising level of stock and put some downward pressure on rents. Tenant demand in city centres is now bouncing back as lockdown restrictions continue to ease and offices start to reopen. This is making it an appealing time for many renters to return to cities.
Gráinne Gilmore, head of research at Zoopla, comments: “Demand will continue to rise in city centres as offices start to reopen and this, coupled with increased affordability levels in many cases, will start to counter the negative pressure on rents seen over the last 12 months.”
Rental figures in regional cities
Between 5 April and 3 May, tenant demand increased dramatically in a number of major city centre locations, according to data from Zoopla. Central Edinburgh saw demand increase by 26% compared to the previous six-week period. Demand increased by 7% in central Leeds and 5% in central Manchester.
During the past year, rental affordability has improved in some cities. Rents in Manchester account for 28% of a single earner’s income. This is down from 30% in March 2019. Rent prices also softened in Leeds with a fall of 0.7%.
With demand back on the rise in city centres, landlords could start to see rents increase again. This could also lead to shorter void periods as more tenants search for properties in these prime locations.
There is a seasonal element to this increase in demand. The UK rental market tends to start building toward a particularly busy period in late summer. However, demand in city centres has started to outpace growth in wider commuter zones.
London rental market
In London, rental prices decreased by 13% during the pandemic as demand fell. Certain areas even saw rents fall by 22%. The average rental price in the capital now sits at £1,832 per month, according to Portico estate agents. On average, a two-bedroom rental property in London costs £1,800 per month.
Robert Nichols, CEO of Portico, says: “As life begins to return to something a lot more like normal, tenants seem to be making their first post-pandemic moves. Renter registrations are already up a staggering 44% from this time last year.
“It seems only a matter of time before balance is restored in the market, which will undoubtedly represent some very welcome news for landlords throughout the capital.”
Portico’s figures reveal some renters will be able to secure a bargain in certain areas, such as in Bexley, Sutton and Croydon. However, the London rental market is showing the first signs of recovery for buy-to-let investors.
“The current snapshot is likely to prove temporary,” Robert Nichols states. “Along with being an excellent time to rent, it could also be a window of opportunity for first-time investors or those seeking to expand an existing property portfolio.”