Despite reasonably strong activity, records haven’t been broken in the same way as the revitalised sales sector.
However, according to new research by global property consultant Knight Frank, in the week ending 22 August, the number of viewings in the lettings market in London and the Home Counties hit a ten-year high.
Tom Bill, Head of Residential Research at Knight Frank, explained: “Part of the explanation is the unusual seasonal pattern of activity in 2020. Students account for almost a quarter of the market and uncertainty around the start of the new academic year meant July was quieter than normal.”
The number of new prospective tenants registering in the week ended 11 July was 26% below the figure last year.
Bill added: “Some students held out until late August before deciding what to do, with many Universities providing the option of online learning until Christmas.”
This late mini-surge, boosted by the recent delivery of exam results in the UK and overseas, partly explains the spike in the viewing figures in late August.
There is little evidence the cause was corporate tenants. Relocation packages are not currently a priority for many companies for both logistical and economic reasons.
Elsewhere, traditional UK-based tenants have been taking advantage of falling rents, with many seeking more outdoor space. The cause of weaker rental values has been a strong supply of properties as owners opted not to sell during the pandemic, exacerbated by the addition onto the market of many short-term lets.
In the 12 months to July, average rental values in prime central London declined 5.8%, while in prime outer London the decrease was 5.4%. In both cases, it was the largest annual decline registered since the global financial crisis in 2009.
In such a tenant’s market, more viewings are typically undertaken before a let is agreed, which will also have helped push the figure to a ten-year high.
However, the number of tenancies started in the same week suggests there is more happening than high numbers of viewings. For most of the summer, the number of tenancies was about a third below the level seen last year. In the week ending 22 August, the figure was 17% higher, suggesting downwards pressure on rental values may start to weaken.
Bill noted: “It is also true that London will remain an attractive destination for overseas students irrespective of how long it takes for Universities to return to more normal conditions. Demand is strong in the capital due to cultural as well as academic reasons and many students have worked for years with the specific aim of a place at a London university.
He concludes: “Should flight schedules around the world continue their return to normality, this will support demand in the normally quieter final quarter of the year and could lead to a few more seasonal records being broken.”
