Landlords and letting agents will be left pondering how the rental market will react to today’s ONS figures showing an estimated 20.4% reduction in gross domestic product between April and June this year.
Covering the worst of the lockdown months, the report reveals record reductions in services, production and construction output during the second quarter of the year.
House building was one of the hardest hit, seeing a 51.2% reduction in activity during the three months, including declines in both new work, and repair and maintenance.
Sales and lettings agents came off relatively unscathed with only a 3.2% decline, compared to accommodation and food services, which saw an 86.7% decline.
Although the figures are bleak, the huge drops were mainly during April when the economy and housing market came to a sudden stop following the lockdown.
Since then, the ONS says, the economy has begun to bounce back with a 2.4% growth in May and 8.7% during June including a 25.3% jump in construction, but even so by the end of June GDP remained 17.2 per cent lower than in February.
Housing industry reaction
“We are in for tough times, however property is still seen as a safe bet and people still need somewhere to live,” says Sean Hooker, Head of Redress at the PRS.
“The government realise this and are providing incentives to stimulate the market. These are not just the temporary tax changes and assistance, but also their desire to encourage property building and capital spending in infrastructure.
“This said, the economic climate could be tough on existing landlords and property investors, with rents likely to fall as unemployment rises and wages are squeezed.
“Mortgage lenders will be cautious as they readjust their future forecasts and affordability criteria. A good number of current landlords may decide it is too hot in the kitchen and exit. But I predict there will be a queue of new investors in line, who are unencumbered by legacy issues and who can adjust to the new climate and make money.
“House prices will be all over the place as regional variations will gone dependent on the local effects of the downturn. Landlords will need to be very canny in where they buy and on what is a good investment.
“Rents will most likely remain steady or even fall slightly as tenants incomes are squeezed, however as demand will rise these will counteract the effect.
“Overall property is still an attractive prospect but anyone in the market will have to work hard to ensure they research and understand the market if they don’t want their fingers burnt.”