Several things changed during the height of the COVID-19 pandemic. During this time of uncertainty, plenty of businesses shut down, and the world as we knew it changed seemingly overnight. Fewer activities were open to the public, meaning people spent more — if not all — of their time at home.
The property industry wasn’t except. Viewings were banned, estate & letting agents shut down and transactions dropped.
It might sound like a dream for landlords that people put more care into their residences during the pandemic. It would seem that if property owners have great rental units, more people would want to move in because it has the amenities they want out of their ideal home. Unfortunately, COVID-19 has changed the real estate market in numerous ways, and not all are positive.
How COVID-19 Has Changed the Market+
The pandemic has affected residential and commercial real estate properties, both in the U.K. and throughout the world. As a landlord, you might find some developments exciting and helpful, but others may want to make you give up on your real estate investments.
In the U.K., market prices recently saw their largest monthly fall in 11 years. That means it’s best to prioritize acquiring more properties and focus on improving the ones you have rather than selling any. Markets rise and fall constantly, so remember to exercise caution with any deals you make.
Businesses and attractions continue to close temporarily in an effort to keep people safer, which has created a domino effect where one building affects another. More people are working from home, so you may want to prioritize residential areas over commercial ones since many companies remain closed and have gone virtual.
10 Market Trends to Keep in Mind
While the real estate market is an ever-changing thing, there are a few things you can anticipate happening during the pandemic. These trends aren’t always positive or something to follow along with. However, you may notice them happening while you’re on the hunt for a new rental property to buy or searching for tenants to move into an existing unit you own.
1. Low-Touch Features
You should look into low- or no-touch options for your tenants in residential and commercial buildings alike. For example, automatic doors can make a huge difference when many people are concerned about coming into contact with the COVID-19 virus. Facilities that are accessible by a card key instead of a passcode can help people easily go in and out without struggling with doors or touching keypads.
You might also look into automating bathrooms if you own commercial real estate. Having automatic flushing toilets, sinks and soap dispensers can go a long way to prevent people from touching the same surfaces repeatedly, cutting down on the need for constant sanitization.
2. Fewer New Builds
The virus reached all corners of the real estate market, even the construction portion of it. Since there are more precautions and safety measures in place to mitigate the spread of COVID-19, you might see fewer new builds for as long as the pandemic continues.
You should consider investing in already-existing buildings if you’re looking to add to your portfolio. Because fewer construction projects exist, you might find that building something from scratch will be a higher price than what you’re used to. Projects you have in mind that rely on new construction should take a backseat for the time being.
3. Tenant Safety
Tenants of residential buildings might be worried about their safety now more than ever. In addition to keeping things clean and as touch-free as possible, you should also consider taking precautions that protect your renters.
Now and then, tenants may come to you with safety concerns. It’s up to you to make them feel safe in their place of work or where they live. Consider installing outdoor security cameras or key requirements to help your renters feel safe to the best of your ability. Anything you can do to deter crime when people feel uncertain and worried will be a significant help to them.
4. Lower Mortgage Rates
Because the market is down, more people may find it easier to buy homes at an affordable rate. At the moment, reduced costs mean lower mortgage rates, so you could obtain a new property for less money than if the market were high. Your mortgage rate will stay low, even when the market fluctuates again, unless you decide to refinance it.
Many first-time homeowners will be glad to see mortgage rates are lower, and people who have dreamed of owning a home may make the jump from renter to homeowner during this time. Rest assured that you’ll still find tenants for your current residential properties in the future when the market changes, as it inevitably will.
5. Commercial Real Estate
Many businesses likely cannot keep up with costs during this time, particularly if their business isn’t open to the public due to safety precautions. Therefore, you have the option to give your existing commercial properties a break on rent or refinance your mortgage so you’re not losing money on your investments.
You might find that commercial real estate could be cheaper than some residential properties. Many companies are going virtual, so office buildings might become a rarity. Working from home offers many benefits, but plenty of businesses will go back to opening their doors once it’s safe, meaning that investing in commercial real estate right now could be worth your while.
6. Lower Rent Rates
You might find it challenging to keep up with the low mortgage rates and your competition. Recently, rents have lowered by about 8.1% in London. This is excellent news for tenants, so you should take advantage of the wave of people looking for a place to live.
By keeping your rent affordable while still allowing yourself a profit, you’ll rest easy knowing you’re helping someone find a home. Staying up to date with renovations may make it easier to find a move-in-ready tenant. Ensuring you have the best-quality property will attract more potential renters, which means you can thoroughly screen them and won’t feel like you’re missing out on collecting from your investment.
7. Resilient Market
The housing market has always been known to bounce back up after taking a dip, as it is currently. You can’t count on things to be ideal for buyers forever — you have to take into account the fact that investments may be harder to obtain later, or you might need to raise the rent for your favourite tenants.
Even if things look pretty bleak right now and you’re unable to find people to move into your existing properties, just keep hoping because you will find that the market will likely tip in your favour again soon.
Your best move would be to analyze the market as it currently stands and figure out what’s best for you. While prices are low, can you invest in another rental property? If you can’t take that chance, focus on improving your current units, especially if they’re vacant, as you anticipate the market swinging the other way in the near future.
8. Less Urban Living
The COVID-19 pandemic caused many businesses and attractions to close to the public. Aside from this move potentially damaging those companies, it also affected the people who live near them. With fewer things to do in the neighbourhood, people may no longer see the draw that initially led them there.
Renters might seek out more rural spaces. Since they don’t feel the need to be in the heart of the city anymore, near ample businesses they can frequent, they may choose to value space and privacy over proximity to shops.
This means you should look into diversifying your portfolio by buying properties in urban, suburban and rural areas. As more people move to the countryside, you’ll likely find that the new desire for homes there works to your benefit. If you haven’t invested in suburban or rural areas, now may be the time to look into it and strike while the iron is hot.
9. More Incentives
As the market goes down, you’ll find it easier to acquire new properties. However, it might be challenging to identify move-in-ready tenants who plan to stay in one of your units for the long haul. In this case, you may have to provide incentives to potential renters.
These incentives could come in the form of a break or discount on rent, or you may consider offering certain amenities. Whichever the case, it’s a good idea to ensure your properties are updated and competitive in the current market.
Keep up with the trends. If you notice that something could give you an edge over your competitors, lean into it and make the renovations you need to. If your rental property has something unique about it, consider playing that up and making it a focal point in the home or building. By boasting about a feature you know that your competitors don’t have, you’ll likely increase your chances of finding and retaining a tenant.
This also works in the direction of your letting agent. Many agents are adopting working from home practices themselves, as a result saving on costs and being able to reduce their letting agent fees.
10. Remote Work
Just as many of your tenants could be working from home these days, you can also streamline your property management by making most of it digital. You can find plenty of apps that can help you manage your properties from afar. You might also consider finding an app that enables you to organize your current rentals, both vacant and occupied, so you can quickly glance at what needs upgrades and what places are next on your project list.
Encourage your tenants to connect with you virtually if they need something. You could strive to keep maintenance requests and feedback all in one app. Having them in one place reduces the need for paper files and can save valuable space in your office. A single app is the only reference you need, and you’ll be able to pull up information about your tenants while you’re out and about, too.
Similarly, if you haven’t digitized your processes, you should lean into current technology to simplify things for yourself and your tenants. For example, instead of requiring renters to pay you directly, you could have them pay you through an app. That way, a record of the transaction exists on both of your ends. There’s also no need to meet in person to exchange the payment. Digitizing your processes makes things more accessible and convenient for everyone involved.
11. Nervous landlords
Many landlords got their fingers burnt during the worst off Covid-19. Eviction bans and tenant rent defaults made things difficult.
Since, we’ve seen an uptick in landlords taking guaranteed rent policies, to protect their income in the face of further lockdowns.
In addition, landlords are reassessing their deposits, often asking for more upfront. This offsets any future losses caused by further pandemics.
Deposits of course need to be managed properly, in accordance with regulatory guidelines
Finding Value in the Current Real Estate Market
The real estate market constantly changes. What might be good for you one day can quickly shift in the opposite direction. The essential part of real estate investing is that you remain positive, even when the market hasn’t swung in your favour.
You should consider what you can do with the current market. You might find there’s a hidden gem in real estate trends that would work to your advantage. Maybe it’s the right time for you to buy, or you’ve noticed the current market doesn’t benefit you. Perhaps you’re putting your extra time, money and other resources into building up the properties you already own and making them more attractive to future renters.
Just because the market might not be all you hoped for during the pandemic doesn’t mean all is lost. You can still manage your existing properties and spend time improving them for your ideal renter niche. Improving components of your properties during a time when you can’t find renters ensures that when the market goes up again, you’ll likely find plenty of people wanting to live in one of your properties.
COVID-19 has affected many aspects of life, and due to that, everything has changed in the real estate market. More people are working remotely, leaving physical offices shells of their former selves. As a result, individuals are spending more time at home than ever before and will be on the lookout for residential properties that suit all their needs. It’s up to you to figure out what your renter niche wants and give it to them. Offering incentives will help them through the pandemic just as their rent supports you.
It’s always worth getting expert advice in the ever changing property market. For landlords, letting agents offer exactly that. Their guidance and expertise can be a saviour for landlords. Rentround allows landlords to compare letting agents for free. Getting the best letting agent can help landlords save money, maximise rental profit and stay clear of falling foul of property regulation.