The year ahead in PRS: Key trends for landlords and investors

2020 cast a spotlight on the Private Rental Sector (PRS), as the pandemic prompted people to question their ties to central urban locations and the UK’s national pre-occupation with stepping onto the housing ladder. 

Undeniably, there are challenges ahead as PRS continues to navigate the impacts of Covid-19, but as the appeal of renting is further cemented as a lifestyle choice rather than simply a financial necessity, a number of trends are set to characterise promising developments in resi-rental sector. 

Renting is on the rise…


This year has seen a good start for the housing market with strong deal flow. But as an end to the Stamp Duty cut approaches this Spring and a third national lockdown continues, many UK house-hunters could temper their ambitions for a step onto the property ladder, instead embracing the benefits of renting in a time of reduced certainty. 

But that is not to say that renting doesn’t hold appeal in its own right. Indeed, one recent survey found that more than a quarter of people rent ‘because it suits their lifestyle’ – a trend that is reflected in different ways across all age groups. 

For people over the age of 50, a primary motivation for renting is not wanting the responsibilities that come with home ownership, while for 30% of people aged 25 and under, the primary appeal was the offer of greater flexibility and not being tied to one location. 

So, it is not surprising to see that demand for rental properties role by 20% year-on-year in 2020 – a trend that we can only expect to accelerate this year. 

…but where? 

While people’s inclination to rent rather than buy may have been bolstered by the pandemic, we should anticipate new patterns in demand for the year ahead, specifically around where people choose to live. 

Indeed, PwC predicts that London’s population could decline this year for the first time since 1988, as no-longer being tied to an office but still facing higher urban living costs prompts people to question their previously city-centric commitments. 

It is a trend that is already being reflected in rental values, with indications that a two-speed rental market could be emerging for the year ahead. In London, rental yields had fallen by 5.3% year-on-year in October, compared to a rise of 5.5% in the countryside. 

While vaccine optimism is rising, working from home will continue to play some part in people’s lives (and influence their living choices) for the year ahead. And even if people do return to city centre living this year, a space that can facilitate home working will no doubt still be at the top of their agenda. 

However, it would also be misguided to generalise city locations en mass. Looking at possible investments against hyper-localised market data will be a vital part of the decision-making process for PRS investors and buy-to-let landlords this year, helping to spot nuanced trends below the macro picture. 

Tech taking over 

Differentiating your offering to tenants will also be an important trend for 2021. While young people are increasingly recognising the benefits of renting as a lifestyle choice, equipping rental products with the technology to support their work and leisure habits has never been so vital. 

Superfast, robust connectivity is now high on the agenda for young professionals, but younger generations are also increasingly environmental and cash-conscious. For instance, Artificial intelligence-driven systems can be used to adjust heating or lighting according to manual programming or by learning tenants’ preferences. These platforms can optimise energy usage not only for comfort, but also to minimise wastage and unnecessary costs according to factors such as your routine, time of day or weather forecasts. 

Indeed, with more than half of PRS properties currently rated in band D or below for energy efficiency, the sustainability credentials of a property will be a key differentiator for the year ahead.  Landlords or investors who fail to recognise this could well find themselves left behind just as the rental sector begins to realise its full potential. 

What next? 

2020 was a year unlike any other for the rental sector. However, with vaccine optimism now firmly taking hold and people increasingly turning to renting not as a financial necessity, but as the best fit for their post-pandemic lifestyle, there is everything still to play for. 

Now is the time to make calculated investments that take into account the rising popularity of renting. But landlords and investors should do so with an eye to hyper-localised trends and while recognising the expanding role that tech will play this year at the centre of the resi-rental market. 

Elisabeth Kohlbach, Co-Founder of Skwire 

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