A lot has changed in the property market in the past few months and the dynamic between sales and lettings has evolved in the wake of the pandemic and ensuing legislative and policy changes. In a recent podcast, Hamad Al Qubaisi, Lettings Manager at Barrows & Forrester, and Goodlord’s Director of Sales, Costas Frangeskou, spoke with Tom Bower, Head of Marketing & Communications at Barrows & Forrester, about these changes and what they see on the horizon. Here’s the breakdown.
Costas Frangeskou: We slipped a bit for a couple of months around new tenancies when people couldn't move. We've seen a positive recovery now where the rental market has got back to its normal status and it seems to be holding that ground. There has been a change with more tenants choosing to stay put at the moment until they can understand what the future holds for them, but at the same time we’re still seeing similar volumes, if not more, in terms of new tenants moving in.
Hamad Al Qubaisi: Since the beginning of May when our doors fully reopened, it’s been all guns blazing with people who couldn’t move during lockdown - but June, July and August have always been our biggest months. I’ve been here in Birmingham for 10 years so I’ve seen the influx of tenants - lawyers and doctors sign new contracts in August, teachers start new jobs in September, and that’s the sort of clientele. So we are busier than normal, which is great for us, but that creates an issue because there’s a lot of choice for tenants at the moment. There are nearly 2000 properties on the market at the moment on Rightmove as of this morning in Birmingham city centre.
Hamad: There are more and more people coming in as more and more businesses are starting to reopen. I know some people unfortunately going the other way and losing their jobs. But I think Birmingham is going to get stronger. Historically, October to December starts to die off in terms of numbers but I think that's not going to be the case this year, I think demand’s going to go on through the rest of the year.
Costas: London is always between three or six months in front of the rest of the country. I think the scale is moving in the opposite direction now as we expect the new normal to be people working from home and therefore less people will consider the need to be in London. So I think the impact on London would definitely be greater than the rest of the country. We're really seeing that in terms of both rents, available stock, and turnaround of business - we’ll see what the future holds.
One of the things with the amount of stock in the marketplace at the moment is a trend we’ve seen for the last year - tenants have got a lot more choice than they've ever had, which means a lot of landlords are having to step up. They're having to make sure that they’re competing, whereas two years ago, if you didn’t take the property once you saw it, somebody else would 10 minutes later. So choice is a big difference now in the marketplace.
Costas: The Build to Rent (BTR) sector or the home building sector are already making a lot of changes. They're looking at areas further out than they were before. Also, they're completely adapting what they’re building. They’re revisiting having more open areas, they’re changing the materials they’re using to focus on copper surfaces due to COVID-19. One was looking at lifts that don’t require you to press a button. We're going to see a change in the future over what tenants want in terms of communities, lifestyle and where they're going to locate themselves.
Hamad: Landlords are competing with the BTR schemes and the new developments, and there's a lot of development going on in Birmingham at the moment. The bar has been raised, whether it's a lick of paint or changing the carpet. People have lived in these apartments 10 years, and they've had nine or 10 different tenants. Landlords are having to invest a lot more money into bringing the apartments up to scratch to compete with these new builds.
Costas: We are in a very reactive marketplace. Every week something changes. We've obviously seen the benefits at the moment from pent up demand. A lot of people that were holding back now want to move - the stamp duty has sealed that even further. I think the unknown at the moment is how much of that is noise and how much will end up in us getting back to normal levels of sales. Also, some people are sitting still and a lot of those are first time buyers. For any chain you need your first time buyers in the marketplace or the rest of the chain can't move on. It's going to be an interesting two to three months to see how this pent up demand plays through.
Tom Bower: We’ve seen the floodgates open. There have been people saving to move later in the year who had the opportunity to save whilst they’ve been at home. We've also had deaths and divorces as well so there's been an increase there. Rightmove released data the other day where 44% of stock that was on the market from when the property market reopened in May has already sold. So we are seeing quite large trends in terms of sales. Even if the government took no action in the property market, it would still be ticking along quite nicely. Now they've lit the fuse, it’s going to keep pushing that forward even further.
Hamad: It’s really busy in our Birmingham office in terms of the phone calls, people coming into the office, the number of inquiries as well. Things seem to be moving, it has a different feel in terms of the number of inquiries coming in.
Hamad: Evictions can be heard in court from the 24 August so landlords can start eviction processes from then. There’s going to be a backlog of evictions and section 21s from before and during lockdown. I think landlords need to be a bit cautious. They need to look at the situation of the tenant, what's the reason they stopped paying rent.
Costas: We're one of the largest rent guarantee insurers in the marketplace, so we see firsthand how many claims come in. Although we’ve seen an increase in volume of claims, they haven't been anywhere near what was forecast. We’ve seen maybe three or four times the normal number of claims requests coming through but we've been working hard with agents, tenants, and landlords to come to agreements and understand the situation. For a lot of landlords, it might be better financially for them to agree a payment plan rather than having an empty property or going through a very long legal battle to remove them from the property. So our suggestion is always communicate, communicate, communicate.
Tom: It's all about relationships. You always hear about the nightmare landlord or the nightmare tenant, and the vast majority of people are good and want to help each other. So in times of crisis such as this, people have pulled together and have been a lot more understanding. I think that's really positive for the sector, with people working together to find the best solution.
Hamad: It’s the start of September when Sunak will start the £2bn home improvement grant for homeowners and landlords alike. In the private rented sector, it’s currently a legal requirement to have an energy rating of an E or above, so this £5,000 could improve the minimum. Most new builds have a rating of A or B so they might not need it. It will cover up to two thirds of any improvement work up to the value of £5,000 per household and all renovations must increase the energy efficiency of the property. Tenants themselves can’t apply but property investors and landlords can use vouchers to improve their rental properties.
Costas: It’s a huge benefit moving forward. Landlords are having to keep up with the new builds coming to market and the BTR sector. Tenants are demanding more and this is a really good injection to help assist landlords with existing properties. It's probably a bigger benefit than most people see firsthand. I'm really looking forward to it and seeing properties continue to improve.
This article is based on a podcast recording, and has been edited for length and clarity.
Oh Goodlord Limited is an Appointed Representative of Goodlord Protect Limited for general insurance products and credit broking. Goodlord Protect Limited is directly authorised by the Financial Conduct Authority, registration number 836727. You can check this information on the Financial Services Register by visiting www.fca.org.uk/register or by telephoning 0800 111 6768 (Freephone) or 0300 500 8082 from the UK. The FCA is the independent watchdog that regulates financial services.