By Russell Pedley, Director and Co-founder, Assael Architecture
As the coronavirus pandemic shows tentative signs of reaching its peak, we’re all starting to wonder what the brave new world we’ll enter into post-lockdown will look like.
The forecasts so far are stark. The International Monetary Fund has predicted that the global economy will contract by 3% in 2020, deeming it ‘very likely’ that we’ll experience the worst recession since the Great Depression.
So, when it comes to the housing market, it’s little surprise that mortgage lenders will be exercising caution with first-time buyers once the world returns to some semblance of normality.
Some have already withdrawn products aimed at first-time buyers with smaller deposits temporarily during lockdown. When we do enter recession – and at this point it’s surely a question of ‘when’ rather than ‘if’ – lenders could well seek to revise their upper loan-to-value limits on a more permanent basis.
Younger first-time buyers often have the smallest deposits proportionally, so this means that many of those saving up to buy their first home may sadly come across a few extra bumps in the road.
While they wait to build up their savings, or for the economic situation to improve, most will remain in the rental market. The Build to Rent sector is poised to take real advantage of this, providing quality homes with secure tenancies to those who need them.
Buy-to-let landlords are not in such a fortunate position. With many people finding themselves unemployed, in more uncertain employment, or with their earnings reduced due to the pandemic, private rented sector landlords will be facing loss of income through unpaid or reduced rent, or through properties becoming vacant.
But because Build to Rent operators are backed by large financial institutions such as pension funds, and usually provide housing on a very large scale, they are able to ride out fluctuations such as these and adapt their business models accordingly.
The sector continues to go from strength to strength, with research published by the British Property Federation (BPF) showing that the number of Build to Rent homes completed, under construction or in planning grew by 20% in the year to Q3 2019.
And it’s not just good business – although it may mean their home ownership dream is delayed a little longer, would-be first-time buyers who decide to rent in the Build to Rent sector can take comfort that their home will be of a much higher specification than that which would be provided by your average buy-to-let landlord.
Apartments are designed specifically for rent, with modern interiors and comfortable layouts – no box rooms or living rooms turned into makeshift bedrooms here. Most buildings also have communal facilities such as gyms, cinema rooms and lounges where residents can work from home or relax.
Last summer, Blackhorse Mills in Walthamstow, designed by Assael for developer Legal & General, became the first Build to Rent scheme to be awarded the Home Quality Mark from BRE Global. Set to complete later this year, it includes flexible workspace, communal roof terraces and even a heated outdoor swimming pool – amenities that will be even more appreciated post-pandemic when we’re able to get back to enjoying shared space.
Another benefit of Build to Rent is that tenancies are often more secure, as lots of Build to Rent operators offer longer-term leases of up to three years, as well as deposit-free renting. This could provide a bit of much-needed certainty in what promises to be an uncertain post-Covid world.
Of course, new demand coming into the Build to Rent sector would also create a virtuous circle, as the industry would then be able to create new jobs in construction and customer services. And who knows – the tenants may be so impressed by the lifestyle, friendship and the flexibility of a Build to Rent community, they may decide to rent for the long term.