Rent before you buy may become mainstream
David Alexander
Anew trend is emerging within the residential market south of the Border, according to a major property portal, largely driven by the unprecedented availability of homes for private rental.
Rightmove says 21 per cent of the properties it lists for sale are chain-free, a jump from 15pc this time last year. This new trend is most acute in London, where 12pc of listed properties for sale this time last year were chain-free, compared to 21pc today.
Now the “chain” is a largely English phenomenon, a sequence of linked house purchases, each of which is dependent on the preceding and succeeding transactions. So the chain-free buyer is always in a strong position because he or she is not burdened by selling his or her property, which may be caused by some backlog somewhere down the line. While chains are not unknown in Scotland they tend to be a lot less common than England and are usually confined to when the market is in the doldrums.
Rightmove has put the increase in chainfree transactions down to increasing numbers of people not buying another house but going into rental accommodation instead, and “testing” life in a new neighbourhood, town or even part of the country, before deciding their next purchase.
The phenomenon is, of course, Covidinspired, but has many sub-features, eg landlords (especially older ones who’ve benefited from substantial capital growth) deciding now is a good time to sell up; great tranches of Airbnb and similar flats returning to the conventional rental market as a result of the collapse in international tourism; and the prospect of a huge increase in empty properties when the furlough scheme ends, leading to an increase in unemployed tenants no longer able to afford their rents.
The latter factor will, of course, depend on when the various “four nations” governunlike ments terminate their no-evictions policies, but these cannot last indefinitely.
I haven’t been aware of many buyers in Scotland so far selling up and taking on temporary rentals in preference to simply purchasing their next property, but I’d not be surprised if it did catch on as the situation north of the Border is even more conducive to the practice than England and Wales.
England, tenants in Scotland are not committed to a determined lease period (usually a minimum of six months) and can terminate their rental agreement by giving just one month’s notice. And in Scotland, as in England, there has rarely been a better time to rent privately, with the huge surplus being reflected in highly-competitive rates. There are currently 1,700 properties available to rent privately in Edinburgh alone, from one-bedroom flats to villas of five or more bedrooms in the most prestigious suburbs. In reality, villas make up a small minority of the stock but families are still catered for by a substantial amount of flats offeringextensive squarefootage.
It seems likely too that temporary renters are unlikely to lose out should they decide to return to owner-occupation after a few months; any rise in house prices is likely to be marginal and may even have fallen back, especially given the previous LBTT “holiday” has now ended.
“Rent before you buy” is not new to the market but up to now has been practiced by a minority. But such has been the effect of covid on the way we live, it may become mainstream. David Alexander is managing director of DJ Alexander