City centre flats have been firmly back on the radar for both investors and tenants in the private rented sector, and the trend could be set to accelerate.
They attract the broadest spectrum of people, from young professionals to families to overseas owners and tenants, arguably more so than out-of-town areas, due to their economies, job prospects and all the extra amenities and transport options available in them.
In the wake of Covid, there were reports of city centre flats falling slightly out of favour among some existing city dwellers. This was largely put down to the ‘race for space’, as people reassessed their priorities, looking for larger properties they could both live and work in, as they no longer needed to commute to work daily.
But city centre flats still hold huge appeal to those who want a more cosmopolitan, convenient way of life, close to all the amenities as well as jobs and transport links. And recently, potentially driven by the cost of living crisis, such properties hold even more appeal than larger homes.
City centre flats back in favour
According to a recent report from Fine & Country, and using data from Dataloft Rental Market Analytics, there has been an increase in “value-for-money homes” during the first two months of 2023 in the country’s rental market.
This equated to a renewed interest in city centre flats, with 53% of homes let in January and February this year being flats – which is similar to pre-pandemic levels and shows a relatively swift U-turn from the race for space.
The data also showed that, in the prime rental market, average rents are up by 13.6% on an annual basis, which Fine & Country says “may be attributed to renters seeking smaller, more affordable accommodation as a response to the rising cost of living”.
While the resurgence in city centre flats seems notable in the private rented sector, Nicky Stevenson, managing director of Fine & Country, also said of the general market: “The rental market continues to perform well and is expected to see a ramp up in activity as we transition from winter to spring.
“Rental prices remain high, supported by demand outstripping the market’s persistent low stock levels.”
This goes alongside a forecast 6% rise in rents over the course of 2023, as predicted by JLL, with an increase of around 20% by 2027 due to the sheer scale of demand in the sector compared with a downturn in supply.
Energy efficiency is a priority
By nature of their smaller size, city centre flats tend to be a more energy efficient option than larger, standalone homes. This is particularly the case when investing in a new-build development, finished to better standards and with the highest energy performance certificate (EPC) ratings.
Among property investors and renters alike, energy efficiency is swiftly becoming a major factor when looking for a new property. For the occupier, better energy efficiency means cheaper running costs, while for a landlord, it makes the property more future-proof when the minimum EPC rating is inevitably raised.
Stevenson commented: “As uncertainty surrounding energy costs lingers, renters are increasingly prioritising energy efficiency,” she said. “Statistics from Dataloft and the Property Academy reveal that 78% of renters considered the Energy Performance Certificate important when searching for a property.
“With government regulations that any newly rented properties must have an EPC rating of C or above by 2025, landlords will need to take steps to improve their score.
“According to DRMA, in the last year just 53% of properties in the private rented sector had an EPC rating of C or above; however, a much more promising 94% had the potential to achieve this rating.”