In the blue corner are those who believe that, within a few months of all lockdown restrictions being lifted, life will return more or less to what it was before. Occupying the red corner are those for whom the crisis marks a watershed that will result in permanent alterations to the way we live.
I tend to have both feet in the red corner, not least through my experience of running a business during the crisis and experiencing the changes likely to become the norm, not least many staff now working from home. This of course has huge implications not just for occupiers but also for their landlords and, by implication those pension funds (in which most members of the public have a vested interest) invested in commercial property.
Even now, as lockdown continues, changes likely to become permanent are beginning to emerge. Unlike home-ownership, the market in rentals is still relatively active, helped, as I have stated already, by “virtual viewing” which has improved remarkably in a technical sense in just a short period.
And one key change is an upsurge in demand for properties with their own gardens or at least a private patio. This is becoming a “must-have” among many new tenants and there are growing instances of existing rental clients giving notice to quit their upper-floor flats and moving to a rental flat with a garden, even if it means a larger monthly outlay.
I have no doubt that what is motivating people is the value they now put on open private space if they are to work from home on a permanent basis or if – heaven forbid – the country becomes afflicted by another similar pandemic.
Of course, Georgian or Regency “garden flats” found in the more historical neighbourhoods of Edinburgh and Glasgow have always been popular as has “main door” accommodation in tenement blocks because these usually come with a garden or private open space. As a result, main door flats have always attracted a higher premium than those on the upper levels among both tenants and owner-occupiers and I expect the value-gap between the two to become even greater.
For investment buyers, more favourable rentals from main door flats will be the icing on the cake but the real return will be in the rise in capital values – over a longer period, of course – of these properties. All this activity is, of course, currently restricted to the rental sector because the sales market has, to use a railway metaphor, been shunted into the sidings and no-one has any real idea as to when the train will start to move again.
But the new rental phenomenon does, perhaps, offer a beacon of hope to suburban owner-occupiers. During the recession that followed the financial crisis of 2008, some unsuccessful vendors were “saved” by the ability to rent out their properties.
Perhaps the desire for gardens could see rental flat-dwellers turning their attention to the suburbs, to conventional semi-detached houses with a garden. This will give an alternative to owner-occupiers who need to move on but fear they will be unable to find a buyer – or at least someone prepared to pay anything near the asking price.
If the changes described above do become permanent, perhaps the financial institutions will extend their interests in rental properties from city centre flats to “back and front door” housing in the suburbs and market towns. One reason this has not already happened is down to management – it is, of course, easier and less expensive to manage two blocks of flats side by side than 100 properties spread over an entire city or region.
However, increased public demand to rent homes with gardens and the ability to digitally manage a geographical spread of properties (such as through our platform, Apropos) could lead to a change of heart and cause a major realignment of the UK property market.
David Alexander is MD of DJ Alexander
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