While 2020 will be a year most people will want to forget, for landlords it’s been another good year for business. Rents have risen by an average of 1.5% thus far and are expected to finish around 2% higher for the year. Covid-19 and lockdown have turned the property market upside down, effectively ending activity in the usually busy quarters 1 and 2 while pushing the traditionally slower quarters 3 and 4 into overdrive. Rental markets have been especially strong as demand has continued to significantly outpace supply leaving landlords spoilt for choice when seeking tenants.
So, for landlords at least, 2020 hasn’t been all-bad. But what does 2021 hold for the rental property market? Can landlords expect more of the same or are there clouds of the horizon? To get some insight we spoke to landlord insurance specialist and founder of Coversure Nottingham, Paul Hartle, and heard how the good times look set to continue and how commercial landlords in particular could be handed a fresh opportunity.
2020 has obviously been a tumultuous year. As a landlord insurance specialist, how have you and your clients fared?
Speaking to my clients I would say that in the main they have fared okay; properties are let and most rent is being collected. Since the first lockdown ended there’s been more activity as Nottingham has seen a population surge.
Residential landlords seemed to have enjoyed a good year – at least in terms of rental incomes. According to the HomeLet Rental Index, rents have risen by 1.5% in 2020 so far, a figure that looks set to rise as in September and October they increased by over 2%. Are they optimistic about 2021 do you think?
Landlords are in a good position at the present time as there are far more tenants looking for properties than there are available properties, so they can command the best rents and pick the best tenants. Locally speaking there’s masses of opportunity as the city continues its amazing growth.
Nottingham is one of the UK’s property hotspots – indeed it has the fastest rising prices in the UK. Have you seen an increase in demand for landlord insurance over the past year as more people look to invest in the safety of bricks and mortar?
Yes. We have a client who has spent the last 12 months buying property in Nottingham to create a portfolio, he sees the city as a good place to build up his holdings in, and I can see why.
Is there anything that landlords need to watch out for in a rapidly rising market like this?
Property underinsurance continues to be a significant problem in the UK. According Rebuild Assessment over 80% of UK properties are underinsured. If landlords are going to be on the lookout for more properties to renovate and improve then they need to watch they don’t fall into the underinsurance trap.
And what do you think 2021 holds? The government’s figures suggest that we need to build 345,000 homes per year – do you think that’s realistic given the uncertainty businesses are facing?
Housebuilding in this country has never kept pace with demand and I think this challenge will continue into 2021. I read a Shelter report not so long ago that said we needed 1.2m new homes just for young people, people who are more likely to rent.
If new builds aren’t the solution do you think changing the usage of existing buildings could be? With so many people working from home could we see offices turned into flats as we did with disused industrial buildings in the 1980s?
Again, we have a client who has done this in the last 12 months very successfully and is presently converting another old commercial building into apartments. I think this is a good way to regenerate old buildings in a city and help with housing shortage.
If there is to be a new housing revolution, should there be more help-to-rent provided by the government or a push on affordable homes? Young people are already struggling to rent or buy and without them the market could stall and homelessness – something I know you are passionate about – could rise
It is really difficult for the younger generation in society to get on the housing ladder and we need to help them as much as we can by making sure that we build affordable homes for them and converting existing buildings can also help with this. COVID forced many offices to close and many businesses to begin working remotely so there’s definitely a ready supply of potential housing stock.
Many people believe the remote working trend will continue. Are we set to see another change of use revolution as we did in tyhe 1980s?
I certainly believe that businesses who were office based will be looking at that model to see if they can now accommodate home working. People have realised that working from home has some good advantages and this is going to giving the housing industry something to think about in terms of making sure they build houses with office space.
If there is a change of use from commercial to residential, are there any implications from an insurance perspective?
Yes, your insurer should always be aware of any change to the usage of a property as this can affect the policy cover in place.
How have commercial landlords been finding things in the age of the lockdown? Have you seen requests for unoccupied property insurance rise?
Unoccupied property insurance quote requests haven’t really changed over the year – obviously during lockdown, properties were empty, but the insurers amended their covers. I think as we emerge into 2021, we will see a change in this, unoccupied cover requests will increase as businesses realize they don’t need that big office anymore.
If you had to make one prediction regarding the rental landscape in 2021, what would it be?
The property market will continue to be a buoyant as there are ever more tenants looking for property and this will drive the market forward into 2021 and beyond.
Thank you, Paul, most informative.
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The Coversure Team