Impact of COVID-19 on the rental market
Tue, Jun 02, 2020
The change in activity levels in the rental market due to COVID-19 have not yet filtered through to any notable adjustment in rents, according to the Zoopla rental index, which shows rental growth at 2.4% in March, slightly down from 2.5% in February, and up from 1.5% in March last year. Any change in rents as activity in the rental market starts to pick up will likely be captured more fully in Q2 data.
The impact of COVID-19 on activity in the rental market was clear during March. With demand in the rental market falling 57% between March 7th and March 30th, although the impact was greater in the sales market, where there was a 70% decline in buyer demand. The decline in rental market demand has now bottomed out, with demand rising by 30% off a low base in the two weeks to April 14th. This tallies with the flexible nature of the rental market, with activity falling less severely and rebounding more quickly than in the sales market after financial or economic shocks. However rental demand remains 42% lower than early March and 21% lower compared to the same period (mid-April) in 2019 and 2018.
30% rise in tenant demand in the first two weeks of April
The total number of properties available to rent remains broadly unchanged as there has been no large-scale withdrawal of listings, however the rate of new listings coming to the market has slowed. Indeed, there was a surge in new rental supply before the lockdown as landlords in some cities moved homes from the short-let market to the long-let market.
Once the lockdown restrictions ease, activity levels will likely rise, possibly to levels in line with the usual busier seasonal periods in Q3 and Q4. This would mean that total moves within the rental sector in 2020 would be around 25% lower than in 2019.
We do not expect any material change in rental growth in the near term although the likelihood is that the rate of growth will moderate slightly over the remainder of 2020. Rental growth has been rising steadily for the last 3 years but it is unlikely to rise further despite the increase in demand.