Overall activity in the rental market has felt the impact of COVID-19, although to a lesser degree than the sales market, according to the latest quarterly rental market report by Zoopla, which found that tenant demand fell by 57% between March 7th and March 30th, a slightly more modest decline than the 70% fall in buyer demand.
Since then however, rental demand increased by 30% in the first half of April. Zoopla states: “The additional flexibility in the lettings market, which has allowed agents to agree rental deals with delayed start dates and agree terms based on online viewings, means that activity has continued during the lockdown, albeit at a significantly lower rate. Likewise, activity levels are likely to rise more quickly in the rental market than the sales market once the lockdown eases, given that in usual market conditions the average ‘time to let’ –time from listing a rental property to letting it out –is less than three weeks.”
Rental demand and prices
In London, there has been a small but noticeable shift in demand, with the largest proportion of interest in properties rented out for £1,200-1,300/month in April, compared to February, when the greatest interest was for properties priced at £1,400-1,500/month. This could possibly be related to more challenging financial circumstances among some tenants, but it is too early to say if this trend will persist. Outside London, where affordability pressures are less severe, rental prices have remained more stable, according to the report.
The annual rate of UK rental growth for new lets was +2.4% in March, down from +2.5% in February, and just above the 10-year annual average of +2.3%. Month-on-month, rental growth slowed in January and February, before posting a small fall in March. This is broadly in line with seasonal trends and not directly attributable to the Government measures introduced to combat the current COVID-19 crisis.
Average earnings (+3.1%) continue to outpace rental growth according to the latest ONS earnings data. However, if the economic outcomes from COVID-19 prompt a decline in average earnings, the gap between these measures will start to narrow.