Goodlord and Vouch have released their largest ever State of the Lettings Industry report, which found that lack of stock was a top concern for agents, cited by 32% of those who responded.
The report involved 550 agents and 1,700 tenants from across the UK, as well as insights from industry figures including Christopher Watkin, Paul Shamplina and Peter Knight.
The vast majority (83%) of respondents have seen landlords leave the sector in the past year, and 64% believe the coming year will bring more attrition.
Goodlord: Few tenants believe pandemic will affect rent payments
Almost half of agents said that more than 5% of their landlords had left the sector in the past year, while 28% said between 5% and 9% had done so, and 14% said between 10% and 19% of their landlords had left.
The combination of stamp duty holiday and mounting regulation has seen a greater proportion of landlords cash in their portfolios; 43% of agents said they believed legislation was the prevailing factor in landlords exiting the sector.
Top priorities for agents in the coming year included generating more revenue and reducing their administration time.
The number who said winning new landlords was their main priority has reduced, indicating that many in the sector are looking to increase revenues from what could be permanently reduced stock levels; 27% of respondents are putting winning new landlords at the top of their priority list, down from 44% in 2020.
Nearly a third (32%) of responses placed legislation and compliance as their biggest concern.
Almost two-fifths (38%) of tenants believed that the repeal of Section 21 would have a ‘major and positive’ impact on the private rental sector (PRS), a sentiment shared by only 8% of agents, while 30% of agents said it will have a ‘major and negative’ impact.
Similarly, 43% of tenants were very optimistic about the impact of the introduction of lifetime deposits, compared to just 17% of agents. Agents are much more ambivalent about this change, with 26% believing lifetime deposits will have neither a positive or negative effect.
Two thirds of agents were no longer seeing an increase in the pace of arrears, indicating that the first six months of the pandemic drove the biggest rise in arrears, with the pace cooling off or stabilising over the past 12 months.
The number of lettings professionals reporting an increase in arrears halved since the previous survey, dropping from 64% to 32%, with an additional 14% of agents saying arrears have decreased over the past year.
However, 48% of respondents reported that arrears had stayed at the same level over the past year, which indicates arrears remain higher than usual.
Meanwhile, 16% of respondents said arrears amongst their tenants had increased by 30% or more over the past year.
One long-term change that the uncertainty over arrears appears to have driven is the popularity of rent protection products. Almost two-thirds (62%) of agents are now offering a rent protection product, with half of those not yet offering one actively considering it.
Optimism from agents remained high year-on-year. A large majority (67%) felt either ‘very optimistic’ or ‘somewhat optimistic’ about the future of the lettings industry, though this is down from 80% in September 2020.
More agents are currently on the fence compared to last year, with 23% of those surveyed feeling neither optimistic or pessimistic about the industry, up from 14% in 2020.
Only 1% of agents are ‘very pessimistic’ about the future of the industry.
Tenants reported strong signals of confidence in their own finances. Only 6% said they remain concerned about the pandemic affecting their ability to pay rent; this rate was halved compared to the previous survey – in September 2020, 12% of tenants reported concerns about their ability to pay rent.
Just 4% of tenants said they had missed some payments or organised a payment plan in the past year, though this was an increase on the September 2019-September 2020 rate of 2%.
However, the vast majority (81%) said that the pandemic had not had any impact on their ability to pay rent in the past year.
This was up on last year’s figure of 75%, despite the fact that 24% had been furloughed at some point during the past 12 months.
A huge majority of tenants (75%) now believe their income is secure.
Most tenants also predicted that they will remain in the PRS for many years to come – 54% said they would not expect to own a property in the next five years – or were not sure if they would.
Less than half of tenants (46%) said they did expect to own a property within 5 years.
Only 16% of tenants said they had moved or considered moving as a result of COVID-19 in the past 12 months – a decrease of 11% on the previous year.
Among those who did move, 80% did not intend to move again.
The research found that the lettings industry continues to embrace technology and task automation, with only 1% of respondents reporting that they do not use any form of technology or task automation in their businesses, down from 5% the year before.
More than half of respondents said that automation would be accelerated in their businesses over the coming year.
For those that said the levels of automation would remain the same, 15% said that they would now prioritise technology that enables remote working.
Almost a fifth (17%) said that they would prioritise technology that enables workforce reductions, but 36% of agents believe automation will accelerate in their businesses without impacting workforce numbers.
Respondents identified referencing, administration, and compliance as the main areas of the lettings process where technology and automation could be the most beneficial.
Commenting on the State of the Lettings Industry report, Tom Mundy, COO of Goodlord, said: “This report paints an encouraging picture for the industry. Key signs of recovery can be seen in the arrears data and tenant sentiments, and the majority of agents are still feeling optimistic about the future of the sector.
“Specific concerns around lack of stock and upcoming regulation are well founded, but it appears that agents are becoming increasingly proactive in this regard.
“Sourcing new revenue streams, embracing technology, and streamlining processes are all gathering pace, as agents make their businesses fit for the future.
“After a year like no other, these insights offer a picture of a resilient, forward-thinking industry which is moving with the times and responding to major shifts in tenant demand and landlord behaviour with characteristic stoicism and professionalism.”