Landlords should Prepare for Fall in Rental Income

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Promoting a rental portal with a suggestion that the Coronavirus crisis will see rents fall and landlord income slashed might not seem like the best thing to do, but that is what Home Made has done.

But then again, part of its pitch is that it claims to be different.

‘We are not an agent’, says the company. ‘We are a property-technology company with a unique approach: entirely centred around you. We have made the process of renting and letting a home simple, fair and transparent with our unique centralised model, proprietary technology, an outstanding team and a non-compromising commitment to compliance standards’.

With such an investment, Home Made might be expected to have a bullish assessment of the market. But it does not.

‘Home Made analysed rental value trends post the Global Financial Crisis and applied these figures to 2020 to predict the size of the upcoming hit to the rental economy. It projects that rental income won’t be back to pre-COVID levels until early 2024’. 

And its conclusion is that rents will fall by at least 5 per cent until 2024, costing UK landlords £5.7bn in income –  which is four times the loss experienced in the 2008 recession (£1.3bn).

London is expected to be most affected, with a rental income decline of at least 9 per cent, cutting £3.9bn from rental income by the time pre-Covid prices return – with Westminster, Tower Hamlets and Wandsworth areas worst hit. 

‘Landlords across the UK need to brace themselves for reduced returns’, said Home Made founder and chief executive Asaf Navot. ‘In a recession, renters with tighter budgets are less inclined to take a risk and move homes due to reduced disposable income and increased job market uncertainty which drives rents down – and the Covid-19 recession looks likely to hit harder than any in living memory. 

‘Landlords can protect themselves by acting fast and securing longer term tenancies with their current renters, or alternatively by reacting quickly to the pent-up demand on the new rental market following lockdown. Landlords can also choose to prioritise long term income over short term gain by offering rent reductions for lengthier contracts, guaranteeing greater financial certainty’.