On 31st January 2020, the UK officially left the European Union, a decision which came to be known worldwide as Brexit. This move marked unpredictability across various industries, and the property market was no exception. Then came COVID-19, which triggered further changes. Property costs and rental income greatly fluctuated. The shifts were caused by uncertainties in the minds of owners and landlords who tried to grapple with the consequences that Brexit and COVID-19 might have on their investments.
Impact of Brexit on the rental market in the UK
Following Brexit, several trends were observed in the English rental market. Demographic changes were observed across the nation as the proportion of EU nationals living as tenants gradually decreased. A study performed on 300,000 tenancy agreements in England signed between January 2017 and November 2020 revealed that the proportion of EU tenants dropped from 20% to 14% between these years. The proportion of foreign tenants from non-EU countries also reduced from 13% to 11%.
With a drop in rental occupancy by EU nationals and non-EU nationals, the number of renters having UK citizenship rose to 74% from 66% in three years. It was observed that by 2019, the proportion of renters in England who were from the EU was about 16% and those from non-EU countries made up about 12% of renters. UK citizens made up almost 71% of tenancy in all of England. In the following year, renters having UK citizenship occupied more properties while EU tenants and non-EU tenants occupied about 14% and 11% of the rental market respectively.
The biggest impact of Brexit has been felt in London where at least 700,000 residents born in another country left in recent years, according to a study. In 2017, about 29% of the rental population in London comprised EU nationals whereas in 2020, the figure decreased to 22%. Research indicates that rental prices in London fell by 6.9% by October 2020. Two areas having some of the most expensive property in London dropped their rents by 10% and 15% each. Because of the relative drop in demand, landlords had to reduce their prices to appeal to potential tenants.
Behavioral tendencies of residents in the UK
London witnessed the most significant changes in rental income which grew at a much lower rate than what was projected initially. The uncertainties caused by Brexit prompted many to relocate to more affordable cities in the UK. However, as mentioned earlier, those with UK citizenship saw shifting prices as an opportunity to invest in the lettings market.
At the same time, prices of houses decreased initially but rose after the end of the first lockdown in 2020. The fluctuating housing prices coupled with a shortage in housing supply encouraged many people to stick to their rental places. Though property sales boosted partially, many people chose to stick to the flexibility that came with renting. Young professionals and university students are continuing to rent spaces in London since they do not want to carry the burden of a mortgage early on in their careers.
Impact of COVID-19 on the UK rental market
In addition to Brexit, COVID-19 caused many difficulties for the lettings market. According to a study, nearly 50,000 private-sector renters had not been able to pay their rents on time in January 2021. The average debt is £730 and nearly 58% of renters had rent arrears for the first time. The proportion of people having rent arrears is expected to rise up to 400,000 by the end of 2021.
A rise in unemployment levels coupled with job insecurity has caused many private landlords to experience rent arrears. The ban on evicting tenants has been extended many times and is presently expected to be lifted by the end of May. A study reports that more than 30% of private landlords are considering reducing their investment in the property market or leaving entirely because of significant financial losses. Not much assistance has been provided to these landlords during the crisis either.
Moving forward, there are several factors that will have a direct impact on the rental market. There continues to be a steady demand for rental and housing properties which is expected to grow gradually through 2021. The stamp duty buyer holiday support provided by the government enabled many to invest in their first homes during the pandemic. Also, the steady rise in economic recovery post-pandemic coupled with reduction in unemployment levels and income growth are gradually contributing to an optimistic view for the future.
Rent through NACCS
With rental prices being more resilient than housing prices during challenging circumstances, it is entirely possible for the rental market to witness levels of growth in the upcoming five years. However, considering how circumstances fluctuate rapidly, you can never be assured about what might come next for you.
To ease your worries, consider working with us at Nationwide Accommodation Services (NACCS). We are a UK registered organisation focused on providing guaranteed rental income to landlords who are in search of hassle-free rental solutions. In challenging situations like Brexit and the pandemic, all landlords working with us received guaranteed rental payments in a timely manner.
Working with us is not a difficult process. Simply register your property for a valuation on our website. Our agents will be in touch with booking a free home visit and determining whether extra steps need to be performed prior to letting your place. Once the property is ready for letting, we will let you know about next steps. To get started, send us an email at firstname.lastname@example.org or give us a call at 0203 095 0954 today.
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