The latest research from proptech rental start-up, Home Made, has predicted that a potential Covid-19 recession will see UK rents fall by at least 5% until 2024 costing UK landlords £5.7bn in income – four times the loss made in the 2008 recession.
Home Made analysed rental value trends post the Global Financial Crisis and applied these figures to 2020 to predict the size of the upcoming hit to the rental economy. It projects that rental income won’t be back to pre-Covid levels until early 2024.
London is expected to be the most impacted region, with a rental income decline of at least 9% or £3.9bn in losses for the capital’s landlords by the time pre-Covid prices return – with Westminster, Tower Hamlets and Wandsworth hit the worst.
Asaf Navot, founder and CEO of Home Made said, “Landlords across the UK need to brace themselves for reduced returns. In a recession, renters with tighter budgets are less inclined to take a risk and move homes due to reduced disposable income and increased job market uncertainty which drives rents down – and the Covid-19 recession looks likely to hit harder than any in living memory.
“Landlords can protect themselves by acting fast and securing longer-term tenancies with their current renters, or alternatively by reacting quickly to the pent-up demand on the new rental market following lockdown. Landlords can also choose to prioritise long term income over short term gain by offering rent reductions for lengthier contracts, guaranteeing greater financial certainty.
“Also, consider what else can be done to make properties more attractive to renters in the ‘new normal’. Highlight any outdoor spaces, consider allowing pets in the property (pet owners stay around 80% longer in a rental property) and adjust the space for home working. This will all help you stand out and let your property in a slower market.
“We’re yet to see the full extent of the recession and it’s likely to be a renters’ market for the foreseeable future, but this is far from doomsday.
“The good news is rental property is a more robust investment than others in a recession, protected from the extreme peaks and troughs of the sales market as people still need to rent homes, even if they’re cutting on other costs such as travel and leisure. Renters are still enquiring, and landlords who are willing to compromise and prioritise longer-term income and smart cash flow management over short term profits – at the same time as streamlining their operations to cut costs – are most likely to succeed.”