Impact of lockdown could set Liverpool back years, warns property expert

Alan Bevan, City Residential managing director

A Liverpool property expert says the anticipated “tidal wave” of non payment by tenants has yet to materialise after the shock of the UK lockdown – but he has raised concerns that, in the long-term, the city’s greatest strength could become its greatest weakness.

Alan Bevan, boss of estate agent and letting agent City Residential, said the city’s residential market was rocked by lockdown, particularly the overseas student sector.

Liverpool universities attract a sizeable overseas student market, particularly from China.

With the lockdown essentially banning new listings, viewings (except by video) and face-to-face meetings, new activity in the market slowed to a trickle.

Mr Bevan said that, while government support for both landlords and tenants is welcome, there were always going to be financial and practicality issues forcing some tenants to exit their existing agreements.

“The first example of this was overseas students who had either been ordered to repatriate to their own country or make the decision themselves to do so,” he said.

“A small number of these did so almost immediately, literally leaving their properties in the middle of their tenancies with no, or little, hope of any recovery of rent due by the landlord.”

City Residential decided to proactively engage with both tenants and landlords to try and ensure both parties’ interests were aligned and protected.

Mr Bevan said: “Overall, we have been delighted by the response from both tenants and landlords who understand each other’s financial impact from the virus/lockdown.

“At this point in time we have yet to see the ‘tidal wave’ of non payment by tenants that many industry commentators had predicated, although the true extent of the financial hardship affecting all parties may become a little clearer as we pass the April pay day period towards the end of this month.

“The deliverability of the Government’s furlough scheme may well play an important role in this.”

He believes it is difficult to gauge the likely effect the crisis will have on supply and demand in the city’s private rented sector until, probably, late May or early June as more clarity becomes apparent on the release of the lockdown and how this will affect the market going forward.

He said: “There is no doubt that there will be a short-term increase in supply of apartments to let. This will be driven by some tenants deciding to vacate their properties and maybe return home.

“Interestingly, we have seen a huge increase in landlords, both individual and corporate, who had previously let their properties out on a short-term basis – Airbnb, serviced etc – now seeking the ‘safety’ of a more traditional AST (assured shorthold tenancy) rental model.”

He says demand will be driven by similar issues affecting the rest of the UK, which will be dominated by the financial impact of the current crisis.

“Should the lockdown continue for longer than expected and the economy struggle more than anticipated, then there is no doubt there will be a lower demand for rental property.

“As the rental market in the city is strongly influenced by the student population, it will be vital to establish how the demand for university places for the upcoming academic year will be affected.”

Current analysis suggests that as many as 50/60% of overseas students may not travel to the UK this September.

While many of these university places may be taken by UK students, they will almost certainly require a different type of accommodation overseas students normally look for, he said.

Mr Bevan believes it is also too early to establish what the impact is likely to be on rents from the coronavirus crisis, but he said: “During conversations over the past few weeks with landlords we have reiterated our belief that it is better to have an investment property occupied and rented, even if the rent is lower than what they have achieved in the past.

“Logically, this is particularly relevant during the crisis where it is very difficult to re-rent a vacant property due to the restrictions on movement.”

However, looking at the bigger picture, he worries that Liverpool could suffer due to its reputation as an entertainment centre in its own right.

“The first two months of 2020 promised to be a perfect start to a new decade. It seems like a new restaurant, food market, bar or events space opened up every week and you couldn’t help but be hugely impressed in what a wonderful place to live the city had become.

“Fast forward a few weeks and the city finds itself in total lockdown with practically all shops, bars, restaurants and offices closed for business.

“Whilst we are no different from any other city in this regard, our biggest concern is what the city will look like in a year’s time, or even two or three years as a result of this unthinkable crisis.

“Liverpool has boomed, not due to its attractiveness to national employers and huge corporate jobs growth, but owing to its leisure offer, its personality and its culture.

“Whilst the city may never compare with the economic powerhouses of Manchester and London, it has developed into one of the most enjoyable places in the UK to live, work and play.

“Our logical concern is that its biggest strength may well become its biggest weakness unless we get through this crisis by early or mid-Summer.

“It is difficult to perceive that all of the wonderful bars, restaurants and culture will survive a prolonged lockdown/downturn.”

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