consequences of cv19 and the coronapanic for the Private rented sector

What will be the long term consequences of CV19 and the CoronaPanic for the private rented sector?

This is hard to predict.

We do seem to be having more of these viruses coming along in recent years and the hysterical media and governments of the world are only too keen to scare people when they do.

In the last two decades, we have had SARS, MERS and now CV19, so we seem to be in something of a regular pattern of viruses.

What is driving this?

Well, increasing demand for meat – both farmed and wild -in emerging nations has been blamed. This combined with bad animal husbandry and crowded food markets is lethal – allowing viruses to jump species into humans

Or, perhaps, the reasons are more sinister? Discuss!

So, it seems likely, that unless these factors alter, which I don’t think they will, that there will be another scary virus along within the next few years.

Certainly, the world seems unwilling these days to cope like it did back in the last major pandemic – the so called Hong Kong Flu Pandemic of 1968/9, (please do look it up). This was kept off the front pages by the Vietnam War and The Troubles in Ulster along with more fun events like the moon landing.

But it killed as many people, but somehow without the relentless media attention. Perhaps we have social media to thank for today’s panic – a thing we did not have n 1968. Or perhaps, people are now just more unwilling to accept risk, loss of control and the reality of death?

God help us if the next virus kills more than 0.2% of the population, which is what this virus was achieving (though it is probably a lot less now).

So, the trends I discuss below, which are caused by CoronaPanic, may become embedded.

CoronaPanic and the Private Rented Sector

What kind of future will there be for the private rented sector?

Well, there will be a big hit to incomes and employment –  which will surely hit both house prices and rents, though the crack cocaine of rock bottom interest rates will keep the lid on household debt burdens (possibly for a long time) and also underpin house prices (and to a lesser extent) rents, a little.

However, supply constraints, greater monopoly power (as smaller competitors in many sectors increasingly go to the wall) and the sheer costs caused by antisocial distancing could see a rise in inflation after 3 years or so, which will translate into rising house prices eventually. Some governments won’t mind this as it will allow some inflation of the debt away

I see the biggest hit being in inner cities, as people in office type jobs, increasingly move to outer suburban locales and rural areas. There is less need to be physically in the office regularly – and what’s the point of being in the centre when few entertainment places are open?

City centre flats with no outside space will be less in demand as will HMO accommodation, which will also impact student lettings.

There will be less demand from overseas students, though maybe these will be replaced, in part, by UK students, who actually may be more comfortable with traditional HMOs than the overseas students. But that said, many of the “Snowflake Generation” will still be too scared to live with others in a shared house. The HMO type of house seen in TVs “The Young Ones” may be a thing of the past.

Still in the cities, the lowered demand for Airbnb / serviced accommodation from holiday travelers and from business people, will mean a lot of new supply, often of flats, coming from this source too. Their owner-operators will be turning them into longer term let accommodation.

Plus, we will increasingly see redundant offices and also shops in inner cities, being turned into residential. yet more excess supply!

And so, the whole story is of excess supply in the inner cities meeting lowered demand, and this seems to me a perfect storm to create lower property values and lower rents, especially for city centre flats.  There was a looming supply of city centre flats in my home city of London, pre-CoronaPanic, this will be only made worse now.

CoronaPanic Winners

The winners may be more rural and outer suburban areas, possibly though not necessarily close to fast transport nodes. Premium price points of property close to stations and metro links may count for less if people only need to make the occasional commute.

In rural areas, as online retail gobbles up ever more of the high street, property closer to major distributions hubs could become more in demand.

I see there being a real risk of major tax increases for buy to let landlords specifically, on top of general tax increases to pay down the enormous debt caused by the CoronaPanic.

In particular, I think the 20% tax credit enjoyed by non-incorporated buy to let investors will be removed. Equalization of tax between individual and incorporated landlords is a real possibility and changes could be targeted on the smaller incorporated landlords (say less than 50 properties). My recent blog explains my thinking on this:  

But despite these risks, we are still seeing and will continue to see net yields of 4 to 5% widely available, often a lot more, plus the potential for capital growth.

With the advantages of leveraging, the attractions of buying to let still will remain strong, compared with other forms of investment.

After all, try asking your bank for a loan to buy shares and you will be shown the door.

Try asking them for a loan to buy a property to let and you will be asked to sit down for a chat.

ABOUT LETTINGFOCUS

Services for Private Landlords

We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk. Our advice is completely independent.

Services to Businesses and the Public Sector

We advise a range of organisations too to help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.

HOME PAGE OF THIS BLOG: Blog

THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com

For general information on our CONSULTING SERVICES: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice

CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials

IN THE MEDIA: Recent Press Coverage

BOOKS:

“SUCCESSFUL PROPERTY LETTING”:

Our book is the highest selling personal finance and property book in the UK. Click here to Find Out More and Buy it. And if you are from an organisation and would like to bulk buy, please ask us for special rates.

“BUY TO LET LANDLORDS GUIDE TO FINDING GREAT TENANTS”:

Also, get this great new guide here, which covers everything you’ll ever need to know to avoid either you or your letting agent getting anyone other than the perfect tenant. Click Here to Buy It.

BOOK FOR TENANTS:

Kids going off and renting for the first time? My Book for Tenants is also Available

TO JOIN OUR FREE NEWSLETTER MAILER which goes to over 3,980 people (as at Jan 2020) just send an email to [email protected]

We do not send spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.

OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS: Landlords Resources

PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here

NEXT ANNUAL SEMINAR EVENT FOR LANDLORDS: Landlord and Property Letting Seminar

TWITTER PAGE My thoughts on property, personal finance, plus a lot of other random things: Twitter 

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.