Costas Frangeskou, Goodlord’s Director of Sales, formerly of Rightmove, and Hamad Al Qubaisi, Lettings Manager at Barrows & Forrester, answer questions about recent changes in the sales and lettings market and what the future holds, including the impact of new legislation and tenant priorities.
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.
The property market’s dead, long live the property market. How are you finding the rental market, nationally and at a local level?
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.
How do you think that’s going to affect the market, with so much stock?
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.
London has taken quite a big hit in terms of the rental market. Do you see that picking up? Is that the same across the rest of the country?
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.
So it might not be the ideal market for landlords but it's more of a tenant's game now. There’s the stock and the opportunity for people to not be in big cities as they’re working from home. How are we seeing priorities change up and down the country?
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.
So we’ve covered rentals, so let’s move to sales. Barrows & Forrester is a big team that’s expanding in 2020, despite COVID. The stamp duty policy the Chancellor, Rishi Sunak, bought in on 8 July means people purchasing property between now and 3 March 2021 could save up to £15,000 on stamp duty on the first half a million pounds on house prices. We had inactivity for about three and a bit months but the floodgates were opened on 13 May 2020. How are we finding the sales market now that it’s open?
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.
Other big news is that evictions can soon start up again. With the evictions process having been frozen, what's the impact been?
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.
There are now £5,000 grants available to help make homes more energy efficient, and to get the economy moving. Not only is it helping improve the energy efficiency of homes, it's also getting trades people in as well. Could you explain the Green Homes Grant policy and what this means to landlords?
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.
