Ome allows renters to reduce the upfront costs associated with renting by replacing traditional deposits with small non-refundable monthly payments.
Established in early 2020, Ome has some predictions for the rental market in 2021…
For more information visit omehq.com.
Ome’s 2021 rental predictions
As 2021 begins, the coronavirus pandemic continues to dominate public consciousness, having a lasting impact on jobs, wages, education, legislation, and health.
And it seems inevitable that this ongoing crisis will impact rental trends this year too.
At Ome, we have four major predictions for the upcoming year:
- Renters will choose suburbs over cities
- There will be an increased need for financial flexibility
- There will be a tenancy boom in early 2021
- More people will opt for deposit replacement schemes
Suburbs over cities
As people continue to work from home where possible, in accordance with government guidance, we predict that suburban properties will remain more attractive than city dwellings. This is due to the space and value for money they offer.
This prediction is supported by data from Rightmove, which reported that enquiries from city residents for village locations increased 126 percent in June and July 2020 compared to the same period last year. They refer to ‘the shift in more buyers looking to move outside big cities’ which began in April and is continuing.
In addition, according to a recent survey of over 1,700 renters by letting agent Benham and Reeves, fast broadband was the number one feature renters looked for in a rented property, overtaking access to good transport links which had topped a previous poll. Perhaps this demonstrates that as long as suburban houses have strong internet for home working, there is little need to be near big cities in order to work.
Need for financial flexibility
The devastating impact of the current pandemic has resulted in the UK’s unemployment rate being the highest it has been in three years.
According to the ONS the unemployment rate for those aged 16 and over stood at 4.8 percent from July to September 2020 and of those out of work around 60 percent are young people. SpareRoom reported that almost a quarter of 23-29-year olds left their rented accommodation during the pandemic to save money.
In addition, analysis of the private rental sector conducted by the London School of Economics suggests that there could be three times the current number of private tenants in rent arrears in England in the next 12 months.
However, perhaps one of the benefits of the financial uncertainty caused by the pandemic is that people will become more financially aware.
Therefore, our prediction is that those who choose to remain in their rented accommodation will look for more flexible and affordable options to help them manage their finances.
For advice on managing your properties as a landlord during the financial uncertainly caused by the pandemic, check out the Hamilton Fraser guide What should I do if my tenants can’t pay rent?
Early 2021 tenancy boom
In November, LandlordZONE reported that the rental market had bounced back in May after the lockdown during March and April 2020.
Our analysis revealed that although market activity slumped by 31 percent during March to May, new tenancies increased by 22 percent year on year, from the beginning of June to end of August.
Using this data, we predicted that the second national lockdown in November will also be followed by a boom in tenancies. This prediction remains likely to materialise as the third national lockdown, which was announced by the Prime Minister on 4 January 2021, will see the housing market remain open.
This third national lockdown (like the previous one) has not caused a total shutdown of the market but renters are still encouraged to view properties online, which could cause them to wait until later in the new year. However, it is impossible to foresee exactly what will happen due to the disruption caused by constantly changing restrictions and continued public health crisis.
Increased use of deposit replacement schemes
Deposit replacements offer an alternative to traditional upfront cash deposits that are taken at the start of a tenancy.
This new model has grown in popularity over the last few years to support renters’ desire for choice and flexibility with their cash flow.
We predict that, due to cash flow issues exacerbated by the pandemic, more renters will utilise deposit replacement options which reduce the upfront costs associated with moving; instead, relying on small non-refundable monthly payments.
Deposit replacement schemes also remove the ‘double bubble’ issue whereby renters are usually asked to pay for a new deposit before receiving the funds back from their previous deposit.
For more information about the pros and cons of different types of deposit replacement schemes, check out the blog by the Property Redress Scheme, ‘What are the risks of ‘do-it-yourself’ deposit replacement schemes?’
It is impossible to predict exactly what next year will bring, especially after the disruption and difficulties wrought by coronavirus. But, as the light at the end of the tunnel appears through vaccine development and roll out, it is possible to look towards the end of the COVID-19 crisis.
For a more in depth look at what is in store for the rental market in 2021 check out the full Ome blog here: https://www.omehq.com/2021-rental-market-predictions/