Following the positive feedback from our first market insights event on 23rd April, which discussed lender appetite and changes in the surveyors’ landscape, we approached our network within the short term lets, STL, market to provide our clients access to industry knowledge and expertise on a heavily affected sector.
Below, we have summarised the key discussion points and thoughts of both our panel and attendees.
What trends have you seen within your client base and have you noticed a move towards diversifying risk into long term lets?
There has not been a significant trend into the long term lets market, contrary to market commentary. A lot of owners with properties in the short term lets market, like the flexibility that this offers and do not want to commit their property to a PRT as this heavily restricts flexibility.
Some owners are also wary of regulation coming into force in April 2021 and believe that demonstrating that their property is a going concern with a significant historic track record of operating as a short term let, will strengthen their application come April 2021.
One of the biggest sectors where an exit from the market has been seen, is where companies and operators underpin and the guarantee income, operating the property commercially through the short term lets market. These operators have relinquished their commitments and as such these properties have entered the long term rental market. This can be seen at Quartermile, where last week, 46 properties were advertised on Rightmove to rent.
Covid-19, could be argued to, have naturally cleansed what was already an oversaturated market place.
What does a regulated market in April 2021 look like and how clear has guidance been on this?
Guidance has been unclear and much commentary gleans what has already been implemented around Europe. Where commentary has been consistent, is the requirement for owners and operators to be present at all times to efficiently and effectively operate the properties with emphasis being placed on owners or operators been present at check in and check outs and accessible to guests during their stay.
Frustratingly a lot of Governmental and Council attitudes tend to look back retrospectively and a forward thinking mind set would be welcome. The market is set to change again and Council’s therefore, need to combine with owners and operators to anticipating future issues and attempt to put mechanisms and legislation in place that aids to mitigate these.
Future trends in the market place
Regulation will increasingly push owners, who do not reside in Edinburgh or surrounding cities, to use agents to operate their properties.
It is anticipated that the holiday home rental market will strengthen as tourists seek to remove themselves from densely populated hotels in search of more isolated accommodation.
Results from polling its users, who are typically 18-32 year olds, notes a different attitude to risk and a desire to still utilise the product.
Other points to note;
50-60% of Edinburgh’s tourism, comes from within the U.K. Restricted overseas travel and a reluctance to commute on planes, is likely to see this figure significantly increase. Being a UNESCO world heritage site, Edinburgh will always fair strongly as a tourist destination.
Many short term let properties have successfully applied for the £10,000 business support grants and achieved rates relief. There has been push back from politicians with regards to this given that a lot of short term lets, STLs, do not have planning consent.
When rates were created the parameters were made in line with the leisure and retail industry. STLs did not exist. Likewise with planning considerations. Retrospectively trying to fit STLs into these two mechanisms does not work and serious consideration needs to be given to how STLs factor within the framework of these confines. The Council and the Assessors need to co-ordinate a more joined up approach when encompassing STLs.
Specialist accounting and tax advice is required to ensure that STLs are operated in the most efficient manner. With special consideration being given to opportunities at exit, such as potentially utilising entrepreneur’s relief.
For larger operators, business interruptions loans are worth considering to help bridge a trading gap.
A reduction of demand in the hotel industry and an inability to forward fund in the PBSA sector, will provide increased opportunities within the Built to Rent, BTR, Sector.
Over supply has led to lower occupancy and lower rates. Whoever can hold on for 2 years will come back to a better balanced market with fairer competition.