A Bleak outlook for the Medway student rental market

Good afternoon readers, I hope that you have been able to enjoy the sun over the past few days. Over the past few days, I have been working one of my landlords with a planned relaunch of the HMO Focus Group later in the year. I know a lot of investors found it helpful.

I am very excited about this relaunch as we will be looking at a completely new format and how we can make it even more valuable both to investors who are just starting out as well as those who have a significant amount of experience. I would very much welcome any suggestions or ideas that you may have in terms of speakers, topics and format!

Some of my investors have invested in student lets and we manage a handful of student tenants. This market is looking to face a serious disruption in the short to medium-term. This is a big deal for Medway student landlords as this demographic makes up a large chunk of HMO renters. Medway has a growing student population, with the University of Kent and Canterbury Christ Church University having a shared campus right by the historic dockyard.

Rent refunds & difficult market conditions

Despite a positive outlook for the economy, things are still quite mixed for property investors. You may have read that the Competition & Markets Authority (CMA) has indicated students may be due a rent refund if they have needed to leave their accommodation due to the Covid-19 crisis. In addition, The National Union of Students has written to private landlords with several demands such as rent subsidies, reductions, or waivers for six months for those impacted by COVID-19.

It further concerned me when I learned that maintenance loans will continue to be paid to cover rents and that universities are making hardship loans available to those who might need extra support! This really is concerning news and particularly as it seems that the valuable contribution landlords make to society has, once again, been overlooked.

From my experience, students are a major group of renters and with universities moving their classes online (such as Cambridge University moving all lectures online until at least the summer of 2021) there is also a reduction in need for rented accommodation. It therefore looks like we are in for a very turbulent time with the student market over the next 6 to 18 months or longer.

With a reduction in demand and possibility of needing to refund rents, this really is a double blow for landlords who still need to cover their costs and run their businesses. I’d be keen to hear what impact you have seen; from a number of discussions over the past week I know some have given rent reductions or waived things such as utilities bills, but some students are not content and are still demanding a completely rent-free period and withheld payments.

What does this mean for the student rental market?

In the medium term, I think we will almost definitely see a reduction in cashflow for landlords as they either struggle to fill rooms, give rent reductions or payment holidays and some students simply refuse to pay. We will see what the outcome of the CMA announcement is when there is the first case; this could open the floodgates to thousands of rent refunds.

In the longer term, the effects remain to be seen as it depends on how much cultural trends develop. In addition, The London School of Economics indicates that as many as 20% of students are looking to defer if classes are delivered online and other activities curtailed. Landlords will therefore need to look to new types of tenant and are likely to turn to the professional market to fill their voids.

I think that we may see a number of sub-par rooms being converted from student to working professional occupancy. These rooms are of an equivalent standard compared to the large majority of low quality (and cost) student digs. Therefore, they will need to compete in the same market pool as higher standard rooms and landlords may either struggle to fill them or attract a lower standard of tenant. It could also lead to an increase in quality rooms becoming available as landlords see the need to meet a different standard in order to compete.

A wider impact could be a complete change to the HMO market, as more rooms become available and therefore become harder to fill. This is one I will be watching closely over the coming months.

Either way, we certainly do have interesting times ahead and I would be interested to hear your experiences! Stay safe and as usual, I am happy to provide advice and guidance as and when you need it.

Hasan

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