How Has Covid-19 Impacted the Buy-to-Let Market?
The light at the end of the tunnel is getting closer for the UK. Almost 34 million people have been double vaccinated at the time of writing and restrictions look set to be fully eased in the near future. As the vaccination rollout continues and certainty starts to return to the market, we’re examining how COVID-19 has impacted UK Buy-to-Let in 2021 and what it means for property heading into 2022.
While the pandemic has affected the wider market in different ways, the effect on Buy-to-Let has been extremely positive, much to everyone’s surprise. But what does this mean for investors and how do they need to adapt to this new market?
Many of the changes that we’ve seen throughout the Buy-to-Let market are intrinsically linked with changes across wider society – particularly as businesses have adopted strict working from home policies, which in turn has changed the priorities of tenants.
Although tenant demands are constantly evolving, a consistent trend that has emerged over the years has been the popularity of prime property in city centre locations such as London. However, as lockdown rules inhibited office working and enforced ‘stay at home’ guidelines, the desirability, and necessity of London living dissolved.
As a result, we saw a dramatic shift within tenant demands, with rural spots outside of the capital rising in popularity. In 2020 alone, London leavers purchased over 73,950 homes outside of the capital, a trend that was replicated within the rental market. Not only were homeowners and tenants leaving the capital, but they were expanding their searches. While London leavers once capped their search radius to 20 miles outside of the capital, this is now reaching 40 miles, which has seen more hotspots emerge along the outer London commuter belt, such as Bracknell.
But what has been driving this London exodus? Naturally, as more people spent all of their time at home, living and working within the same spaces, they began to re-evaluate what they value in a home. Outdoor areas and more spacious homes were two key priorities, which London properties often fail to deliver. Not only did 28% of these tenants move to have more access to outdoor areas and gardens, but 26% relocated to a bigger property.
While tenant demands are constantly changing, the increased flexibility within working environments is seemingly here to stay, which could see the demand for bigger properties remain. As more people split their time between the office and home working, the need for a permanent home office will make the size of a Buy-to-Let property a key consideration for investors.
It could be argued that the property industry was once lagging behind other sectors in terms of technological advancements, but that is no longer the case. National lockdowns and social distancing guidelines meant that the market could not function in the ways it once had, especially in terms of property viewings and regular checks.
Property viewings are essential for both prospective homeowners and tenants, which has encouraged the market to diversify with video tours and online viewings. Whether they’re filmed property walk-throughs to send to clients, or FaceTime videos between estate agents and clients, the market has overcome the challenges presented by the global pandemic.
Securing new tenants is one part of the Buy-to-Let process, which not only involves marketing the property, but solidifying this with different contracts and paperwork. While this was previously done in-person, much like viewings, this was yet another component that estate agents had to consider. Online contracts are now the norm for a lot of estate agencies, where both tenants and investors can sign rental contracts to begin renting the property.
Whether you’re a hands-on or hands-off landlord, you will know the importance of regular maintenance checks. As well as ensuring the property remains in an acceptable condition throughout the tenancy, this also gives tenants the opportunity to voice any issues. Similar to property viewings, these have now been moved online, with the likes of Zoom and FaceTime allowing either estate agents or (hands-on) landlords to ensure the property is well maintained.
Although Covid-19 has made the property market diversify every aspect of both the sales and rental processes, has this been such a bad thing? The advances in digital processes we have seen are allowing for greater flexibility, and give tenants the opportunity to view more properties more easily while encouraging increased communication throughout the tenancy.
The Rise of UK Property Investment
As well as the changes in tenant demand and the Buy-to-Let process, the market as a whole has been heavily influenced by the Stamp Duty holiday. Stamp Duty Land Tax has long been a necessary payment for everyone purchasing property in the UK over the value of £125,000, but since the onset of Covid-19, this tax exemption has been revolutionary.
The Stamp Duty holiday was introduced in July 2020, and raised the £125,000 threshold to £500,000, giving the majority of homeowners and investors the opportunity to save thousands on their purchase. While this tax incentive was intended to sustain the property market throughout the pandemic, it has instead propelled the industry to new heights.
From an average UK property price of over £300,000 to average rents reaching £1000, the Stamp Duty holiday has pushed the market to record-breaking levels. The resilience of UK property is undeniable, and has enticed more investors to the Buy-to-Let market. Not only have more UK investors turned to Buy-to-Let property, but the number of overseas landlords has now reached a new record, surpassing 184,000.
The opportunity to join the Buy-to-Let market while it’s on an upward trajectory has been a key incentive for investors, alongside those that have found themselves with ‘accidental savings’ and seen property as a way of investing.
When combined with the technological advances throughout the industry and an increasing number of rental hotspots, the effects of Covid-19 on the Buy-to-Let market could have been much worse. Instead, investors now have more choice with their investments and a much more streamlined process, during one of the strongest markets we have ever seen.