What with the ongoing global pandemic, Brexit, economic uncertainty and taxation changes; 2020 might just have been the most unpredictable year in property.
Now, with the Stamp Duty Holiday set to end in March, the ramifications of Brexit still to come – and the trajectory of the pandemic still unclear; – uncertainty might just be the most reliable prediction to make for 2021…
But what do the experts think? Assist Inventories spoke to 9 top industry experts to get their thoughts on what 2021 might have in store for the Lettings Industry in 2021. Here are the highlights…
“Covid will continue to dominate 2021. We are now seeing the situation deteriorate yet further; just when we were expecting the light at the end of the tunnel to burn brighter.
The pent up demand to move however is far from satisfied and will continue to drive new business in the lettings sector.
Landlords will, as always, be seeking value for money from their agents, who have taken on a broader role of providing advice in areas previously unimaginable. This presents opportunities to build closer relationships than ever before with customers, which takes time and effort.
The agency basics are a given for success, but, competing effectively in 2021 may require change. Operating ‘like 2019’ is not appropriate in the future.
The commercial pressures and opportunities from 2020 will continue in 2021 – driving even more consolidation than we are already seeing, with numerous household names currently in the headlines.
Those that thrive in this market will be doing so by getting the basics right, focussing on the customer and by using established tools to do the administration – better and faster than ever before.”
“The health of the UK property market in 2021 and beyond really depends on what is happens to the economy as a whole. As long as Interest rate rates remain low, my biggest fear is unemployment on the rental market. Nationally, rents fell just over 2.3% between 2008 and 2010, following the Credit Crunch, while national house prices fell 15.9%.
I anticipate UK rents will also remain comparatively robust in the coming months and years. Rents are very much tied to the rise and fall wage growth and I can’t see why this relationship shouldn’t continue.
Rents will be sluggish next year and maybe dip, – but in the medium term, rise in the UK by between 13% and 15% in the next five years. But if property prices do rise in 2023/24, that means future rental yields will be marginally lower in 2023/4 comparative to today, especially as ultra-low interest rate expectations (according to the money markets) seem to be here to stay for a while yet.”
“The property Industry in 2021 will be one of huge innovation that will change the ways in which agents work forever. There will be some significant shifts made available to agents for the very first time that will see them given the opportunity to re-establish themselves as the most vital part of the process of selling or letting a property over and above portals, apps or other gimmicks.
It is crazy for example that in today’s world, I can’t register with an agent directly into their CRM through their website, immediately receive a property match and automatically be kept up to date of new listings that match my criteria without the agent needing to get involved.
Not only that but from the agent’s perspective technology that allows you to see exactly who has been looking at your properties. Simple advancements likes these will allow agents to no longer have to manually add people to their systems or run property matches – and will also remove the need to phone as many people as possible to get viewings.
This alongside the automation of qualifying tenants and buyers, the automated chasing of viewing feedback and automation around marketing and social media will allow agents to focus much more of their time on the human side of agency and the full Lifecycle of the customer.”
Founder & CEO at Avasa Al
“2021 is expected to be a transition year for all of us – with fears of a large-scale pandemic slowly taking a backseat as we adjust to living in a post pandemic world. We anticipate that in 2021, the rental market is likely to see mixed fortunes with areas and properties that provide a high quality, balanced lifestyle in much higher demand than others.
Factors that may have an impact on the rental market include:
- Brexit – May lead to uncertainty as businesses readjust to new realities of trade and commerce with the EU.
- Working from home – People are moving away from dense cities to cheaper and better-quality areas, with more businesses considering flexible working for their staff.
- Global relocations and international students – Many international students will be re-evaluating the UK as an education destination.
- Housing options – Short-let properties were put in the long-let market this year. This increased supply combined with a lower demand led to lower rents in many areas. Simultaneously, smaller cities saw a larger flow of tenants from bigger cities looking for a better lifestyle, in turn putting pressure on the rents in these cities.
- Flexible tenancies – In order to react quickly to manage their cost base, tenants are likely to ask for more flexible tenancy agreements or 6 months break clauses for most tenancies.”
Managing Director of Multi-Award Winning Estate and Letting Agents EweMove
“There appears to be a theme of debate around the PRS which suggests landlords are ‘selling up fast’ to avoid punitive tax changes, or potential future tax changes that might alter their cash-flow and profitability.
Other discussions run counter to this argument suggesting landlords are still seeking to acquire more property.
Each landlord will of course have their own strategy for yield, or capital growth, with properties owned either personally or through a limited company, which changes the dynamic from landlord to landlord.
What remains constant is the critical lack of rental supply – or property supply generally for sale or rent – which means the longer-term outlook for landlords remains positive as far as capital growth is concerned. And as long as any profits made are not taxed too heavily in the future, this will remain an attractive option for many, especially when interest rates remain low and capital growth remains high, as highly leveraged property purchases earn the landlord much more than the return on the deposit value alone might, in other investment vehicles.
So all in all, while property supply remains restricted, rental prices will continue to increase and competition for good quality rental properties will increase.
And with the requirement to upgrade properties to higher EPC ratings over the next few years and the extension of further regulation into the PRS, tenants ‘should’ get a better service with better homes in exchange for their increased rent.”
Chairman at Multi Disciplinary Estate Agency Group Choices, London
“For me there are two aspects to this, the first is what I think will happen if things don’t change. The second is what I think could and should happen if we implement some simple changes to the way the market operates.
If things stay as they are there will continue to be an exodus of small private landlords and the onwards march of the large-scale build-to-rent developer.
This process is inevitable while the government pursues a policy of penalising small landlords with an unfair taxation system while incentivising large landlords with tax breaks and subsidies, – a situation made worse by the appalling way landlords have been treated during the pandemic.
As things stand, we will see more and more small undesirable built down to a price apartments and less and less family homes available to tenants.
This policy has been revealed as even less relevant by the pandemic because, whereas in the past, people went to live where the jobs are; – but now the jobs can often be done from anywhere and people will increasingly choose to live everywhere.”
Managing Director of London multi-award winning Estate Agents Adam Hayes
“Buyers and tenants are increasingly realising that their current homes are not ideal for their new lifestyle. Small families now need a garden – and a second bedroom is now needed for the bachelor who works from home. I expect these trends to continue next year.
I believe that there will still be growth and demand in the rental market in 2021, but that the sales market will slow down, with prices even falling after the stamp duty holiday ends in March 2021. Those who haven’t taken advantage of the holiday will find that renting may be a safer option short term while property prices adjust.
This could see rental prices rise as demand surges just as they did in 2018 when buyers were not sure if Brexit would create a price crash and decided to postpone their purchase.
On the flip side if the Stamp Duty holiday is extended this will ultimately delay the fear of a price crash and we will see the opposite, where sales prices will go up on the back of the strong demand and rental prices may dip as tenants choose to buy rather than rent.
If people lose their jobs due to COVID and we find ourselves in a global recession, tenants, especially in London will find it difficult to pay their rents and landlords will have to show flexibility in reducing their rental price or finding new tenants.”
“I suspect the demand will improve in Greater London and there will still be a strong demand in the country. Properties with gardens and more space will be in greater demand. Some of the London rent reductions will be reversed in London but when the recession really hits I think prices outside London will not rise significantly. If Brexit no deal they may reduce slightly.”
“Only a brave man would predict precisely what’s going to happen in 2021. However, the lettings industry has been strong for a while now and we’d expect this to continue. Sales might be up and down, depending on what happens when the stamp duty holiday ends, but if sales decrease in the final three quarters of the year then this should obviously increase demand for rental properties even more.
The other (near) certainty is that 2021 will probably be tough on private landlords. Some will get squeezed out by Build To Rent developments, and the changes to carbon monoxide and energy performance regulations could hit a few in the pocket too.
Perhaps the biggest cloud, however, is the OTS’s recommendation to increase capital gains tax whilst simultaneously lowering the annual allowance dramatically. If this comes to pass then many private landlords, especially the smaller ones, will run for the hills.
The other big issue that could impact the lettings industry is obviously the Renters Reform Bill. If section 21 is abolished, and little is done to offset the abolition of ‘no fault’ evictions, then we could see rising rents and far fewer potential landlords investing in property.
Overall, however, the outlook for the sector is looking rosy. People will always need to move. It’s just a question of who will replace smaller landlords if they do sell up. Consequently, we wouldn’t be surprised to see more PRS as companies in particular sniff out lucrative opportunities in the property market.”
Thank you to all the industry experts who took the time out of their busy schedules to give their valuable opinions. If you are a publication wishing to use any of the excerpts from this article, please make sure you reference Assist Inventories. And if you would like to view the full quotes for use, please email firstname.lastname@example.org