October 18, 2020
As always we try to crystal ball gaze to see what might be happening in the market around the corner. While very few things in 2020 could have been predicted, one thing is certain – we could be facing a winter of new challenges and opportunities!
If you currently have or are about to have an empty property, you might find this article useful reading...
I have recently been assessing some Citylets data which makes for interesting reading. Under normal circumstances, at this time of year, I would be expecting a slight increase on TTL - this is the number of days it takes to let a property - along with a slight decrease in property rental values. So, normally around this time of year, we have to manage our clients’ expectations and be very realistic about rental values. Ultimately, all year round we want to find great tenants; ideally having a choice of tenants, as well as keeping the empty period to a minimum. But at this time of year especially, people are thinking more about settling in for the winter and you generally see less tenant turnovers in properties. Therefore, if a Landlord does find their property empty at this time of year, they need to be sensible about what is feasible and realistic.
The current Citylets data runs to end Q2. For 2 beds the graphs are suggesting a small decline in rental values from start Q1 this year to end Q2 and if it continues on this trajectory it could suggest that Q4 will see average rents go from £1142 at end Q4 2019 to c£1075 at end Q4 this year and 2 bed averages go from £1054 to c £995 respectively- both around a 5.8% reduction. Added to that, Edinburgh has seen an increase in time to let (TTL) from 22 days in Q1 for 2 beds to a current 38 days with a suggested extrapolation to over 40 days by year end.
Why is this? In 2020 we have almost come to terms with the fact that nothing is predictable or easily explained! However, it could be a combination of traditional seasonal dips along with the impending end of the government furlough scheme and continued new announcements of Covid -19 related lockdowns and restrictions, which is leading to a level of decision stagnation. Furthermore, in Edinburgh we seem to have a slight oversupply issue which could be attributed to:
- more tenants leaving (students as fearing further lockdowns)
- additional supply due to the migration of AirBnB properties to long-term lets
This is why I believe our price drop trajectory in Edinburgh is slightly more aggressive, compared with Glasgow.
Along with all the above, people obviously don't have the same level of job security, there are childcare issues where perhaps there were none pre-Covid and making large financial commitments could feel a little scarier for some. These aren't just issues for Tenants, as a Letting Agency who pride ourselves on our rigorous Tenant referencing and checking procedures, we want to confidently and happily be able to recommend Tenants to our clients. So, even if a property does get interest, we go about things the way we always have; with caution coupled with a heightened awareness of issues that could come up.
This overview may be helpful for Landlords who are having discussions around price changes.
The link to our 'Landlords: Our advice for rent reductions in light of Covid-19' is available in the link below.
