Our Rental Market Report revealed that a two-speed rental market is emerging, driven by diverging trends in supply and demand between London and the rest of the UK.
This imbalance is set to remain a feature of the rental market for the rest of the year. And as this gap continues to narrow, rental growth will start to slow.
Here are three factors that are likely to influence activity in the coming months.
Employment levels and labour mobility are important trends to watch. They are key drivers of demand in the rental market – and no more so than at this point of the year.
Some 40% of demand for rental property is clustered between July and October every year as graduates leave university and start new jobs and a fresh wave of students move into university ‘digs’.
But the student influx in late summer may not be as large as normal, as universities move towards more online learning.
In addition, Chancellor Rishi Sunak’s furlough scheme is set to close at the end of October. While the Bank of England (BoE) expects most furloughed staff to be re-employed, it predicts that unemployment will peak at 7.5% towards the end of the year.
Unemployment is then likely to gradually fall at the start of next year. And this uncertainty will no doubt have a trickle-down effect.
The extent to which normal life resumes will have a major impact on activity. Prime Minister Boris Johnson postponed further easing of lockdown measures across England at the end of July, saying he is squeezing ‘the brake pedal’.
And some regional lockdowns, such as in Manchester and Aberdeen in Scotland, are now in place.
A slow reopening of town and city centres is expected to act as a drag on rental demand at what is normally a busy spell.
The spike in staff working from home during lockdown, with a slow return to offices over the rest of the year, is also a sign that demand for rental property could remain subdued.
Lockdown has already taken its toll, with 49% of renters saying that coronavirus has prompted them to delay moving, according to our recent survey.
Many lenders pulled their high loan-to-value mortgages from the market in the wake of the pandemic – and this hit the first-time buyer market in particular.
However, this reduced availability of mortgages is likely to support demand for renting, as aspiring buyers with small deposits are forced to put their purchasing plans on hold.
This is backed up by our recent survey, which revealed that 30% of homehunters under the age of 35 have delayed moving because of problems getting a mortgage or deposit.
Find out more about the rental market outlook in the latest Rental Market Report.