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A shift in tenant living patterns

Paul Fryers

August 10, 2021

Paul Fryers is managing director of Zephyr

The pandemic has changed a great deal about both our personal and professional lives. Perhaps most notably for the housing market, it has influenced where some people want to live: a trend highlighted in recent quarterly rental indexes from The Deposit Protection Service (The DPS), a sister company to Zephyr Homeloans.

While proximity to a workplace or public transport may once have been the most decisive factor for where some people chose to live, the pandemic seems to have caused many tenants to re-evaluate their living situations. The increased rents in places considered desirable reflect how landlords adapted to the shift in popular rental types and locations.

In The DPS’s Q2 2021 Rent Index, we saw a trend continue, showing increased rental growth for larger detached or semi-detached houses as compared to smaller property types, such as flats, which experienced a much slower growth rate. This trend continued with the sustained increase reinforcing the view that home working prominence and more flexible work arrangements have altered tenants’ property requirements.

The DPS data also show that the average monthly cost of renting a detached property in the UK between April and June 2020 was £1,079: £11 (1.03%) more than in Q1 2021 and £71 (7.04%) more than Q2 2020.

Although the rate of increase on the cost of flat rentals rose faster in Q2 2021 than it had done last year, it grew at a much slower rate than larger properties, reaching £812: £4 (0.50%) more than in Q1 2021 and £12 (1.5%) more than in Q2 2020.

This change in tenant demand towards property location and rental type as well as rental costs for flats likely influences landlords’ strategy for their portfolio. There are two main scenarios for landlords:

·         Rebalancing the portfolio by converting the type and location properties based on the migration and choices of tenants

·         Taking a longer-term view, keeping all or most of their property portfolio intact for when tenants return to major cities while investing in new properties based on the migration of tenants

Despite turbulence caused by the pandemic and the economic fallout, landlords continue to invest in properties. We saw a significant amount of buy-to-let mortgage applications in the last half of 2020, reinforcing the suggestion that there is a continued overall resilience in the UK rental market.

The continuation of high tenant demand and record low-interest rates on buy-to-let mortgages represents a positive outlook for brokers, professional landlords and buy-to-let investors in 2021.


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