|June 19, 2020||No Comments|
The Coronavirus pandemic and its consequence (lockdown being
imposed in late March) have shaken up the Edinburgh residential
property market – including HMO lettings and management. Luckily,
due to Scotland-specific legislation, local landlords were (in general)
better prepared than their UK-wide counterparts. In fact, late May and
early June brought increased demand for HMO properties.
Edinburgh is both a tourist and university city: 2018 figures (Visit
Scotland) show that 2.8 million British and 2.4 million foreign
tourists visited the city that year. Full-time students over 16 comprise
more than 12% of Edinburgh’s population. No wonder Coronavirus
and its lockdown caused an earthquake that shook Scotland’s capital!
In March 2020 the volume of available properties on the market
increased by 66%, as short-term and holiday lets flooded the long-
term rental market. Scottish universities suspended some activities,
and switched to online mode at the turn of March and April. So, was
it a disaster for Edinburgh’s HMO market and HMO letting agents
like Edinburgh Letting Centre? Not really.
Since 2018, Edinburgh landlords have been accustomed to longer voids, starting in May, with the market picking up in July/August. Scotland has a different law than the rest of the UK – and Scottish Parliament has significant devolved powers. Before 2018, Short Assured Tenancies allowed letting agents to sign 11-12 month leases for most HMOs, starting in August and September. Then, on 1 November 2020, Private Residential Tenancies replaced SATs. This now gave tenants (among other things) the right to leave any time – by giving only 28 days notice. Thus, technically, tenants can collect keys and leave, giving the notice to quit on the move-in day – and move out 29 days later!
This brought profound change to the way HMOs are managed. In 2019, when a significant number of PRT leases were contracted, students started to leave their accommodation in May or June. Better properties (higher standard, better location, better price) quickly found new tenants or were kept by long-term tenants. High quality properties, with a reasonable asking price, put on the market in May would be gone within a few days. More expensive HMOs, or the ones with perceived poor value (inconvenient location, tired decoration, small communal space), would linger on the market until August – only to be snapped up during the high season frenzy. So, landlords, starting from 2018, had a clear choice: make their properties more attractive or face longer voids. Some dropped the rent for the summer months, some redecorated or refurbished their flats, and some decided to do nothing.
And then Corona struck! So, what has been its effect? The trends started by Private Residential Tenancies have, pretty much, accelerated. Students left en-masse slightly earlier, between April and May, instead of May and June. The best quality properties found new tenants willing to move in earlier (for example, in July) nearly immediately – and their landlords had a choice between 4-5 sets of tenant applicants. Friends of current HMO tenants residing at perceived high-value properties, applied to secure attractive accommodation. Many landlords decided to use the 2-3 months of void to do up their properties, and then put them up for rent in July (expecting increased competition for good tenants).
Overall, the end of May brought increased property movement – despite face-to-face viewings not being allowed yet. We have been answering many phone calls from Edinburgh landlords worried about the on-going prospect of universities switching some lectures to online mode – yet, tenant demand is still strong. The difference, as compared to last year, is that there are fewer tenants willing to move in July. Nearly everyone is looking to secure accommodation from August and September. The number of Edinburgh HMOs has not gone up. This is because the HMO licensing process took 4-5 months before Covid – and it will not be faster after restrictions are lifted. In short, while holiday let properties flooded the regular long-term market, strict HMO licensing terms meant that the deluge had little effect on Edinburgh HMO market. We expect the next two months to be really busy with upgrades and lettings of the HMO properties that we manage.