Real Estate

Returning office workers push city rents to new highs

Tenants are having to pay more to secure rented accommodation in the cites, as workers drift back to their offices.

The return to full time attendance, particularly for city centre office workers, is probably unlikely to happen. For over two years now, employers and employees have been waiting for the day when everyone returns to work, but that day is perhaps never coming.

Nevertheless, people are returning, most likely on a part-time basis, and most bosses are resigned to the fact that hybrid working – working at home two or three days per week – is here to stay at least in the short-term for these types of office jobs.

People like home working

There are four main reasons for this: People have grown accustomed to home working and enjoy the freedom and flexibility it gives them, while still being wary of catching and transmitting the virus; technology has allowed companies to maintain and in some cases even enhance productivity; and a skills crisis in the UK means that many employers are having to bend to the desires of their workers, in order to retain and attract good staff.

Into the third year of the pandemic and we continue to face ongoing uncertainty as to when all this will settle down – the emergence of different Covid-19 variants can still change. It would force employees who are slowly adapting to a hybrid style of working to reverse course and work remotely again.

Some companies say they have switched permanently to remote working or using hybrid models. Others are still holding out for staff to return permanently to their desks, but each new wave has further entrenched flexible working patterns, and it could be years if at all when things go back to as they were, with mass commuting and packed trains.

The country migration

At the height of the crisis workers and their families made plans to escape the city: why not they thought when you can work from anywhere and enjoy the open countryside in a larger house, perhaps even work in a garden office? Sounds idyllic, and many city professionals took that path. But country living has it’s issues as well, and long commutes for the days in the office soon started to grind on some, prompted many people to return to the city.

Young professionals, singles and couples gave up city rentals to return home, to live outside the city with parents, friends and other relatives. But now, as the restrictions are being eased, once again they are considering the benefits of being close to their work and that means city renting again.

Severe shortage of rentals

It’s being reported that tenants are having to pay up to £750 a year extra in rent to secure rental housing because the cost of renting in the UK has risen at its fastest rate since the financial crisis of 2007/8.

A severe housing crisis in the UK means that average rents rose by more than 8pc in the year at the end of 2021, as fierce competition between renters pushed the average monthly payment to a new high of nearly £1,000, and much more in London.

According to Zoopla, tenants now having to pay an average of £60 plus more per month than was the case at the start of the pandemic.

This all comes on top of increasing prices with inflation, energy costs and taxes. These are and will be place additional financial burdens on families and individuals. Figures show that house prices and rents rose right across the UK, taking in every region at the end of 2021. Though house prices are expected to stabilise in 2022, rents are still expected to rises by between 3% and 10%.

Bidding wars

It’s the chronic shortage of properties to let that has created bidding wars for rentals and property purchases. In some cases buyers and renters have had to pay thousands more to secure the property they wanted.

Its an owners’ market and in the case of the rental market one that has been consolidated by increasing regulation. The increasing burden of regulations on landlords is causing many of them to consider their position and many are simply selling up. But it means that those landlords remaining in the market find themselves in the fortunate position of having few voids and very good returns.

According to one report, the average rental property was let within two weeks of coming to market in the last quarter of 2021, but according to the Daily Telegraph many city lets were signed up either off market or inked-in within minutes of listing.

Property agents Hamptons say that collectively landlords bought 184,100 properties in 2021, which is equal to a market share of 12.3pc, but others sold 201,300 properties, meaning the net number of rental homes fell by 17,200.

Zoopla says that runaway rents are deterring tenants from moving, limiting the turnover of rental homes, while in Belfast, Bristol, London and Nottingham double-digit rental growth of more than 10pc was seen in December. The London market has made a significant comeback from the rent levels at the peak of the crises, with rents now reaching or exceeding pre-crisis levels.

James Evans, of estate agency Douglas & Gordon, told the Daily Telegraph there has been a “clear trend” of renters returning to London in the first weeks of 2022, and that “There has been around a 40pc increase in new letting applicants compared to the same month last year.

As there is also still a very restricted supply of properties, we’re seeing landlords achieve record prices, a high quality of tenant and almost no void periods. There were between 35-40 new applicants for every rental property in the capital,” Mr Evans says, “and four offers received for each agreed let.”

Source
Returning office workers push city rents to new highs is written by Tom Entwistle for www.landlordzone.co.uk

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