On fabric of buildings, everything hinges on ability to pay. This may change in the aftermath of chancellor Rishi Sunak’s generous furlough scheme.
The truth is that there is a wider trend: what institutional investors often fail to consider, and many smaller landlords know well, is that many ordinary people, and in particular young people, are not willing to pay for what they say they want when you ask them.
This will need to be considered by PRS investors in a post-Covid world. What is more, appetite changes fast. The idea that ‘yesterday’s news is today’s fish and chip wrapper’ seems rather old hat to anyone who understands TikTok.
The PRS is not just about buildings, but also about service. On this, Helen Gordon, chief executive of Grainger, got it right when she described a core focus on innovation, communication and improvement. Kindness, compassion and a flexible, responsive service driven by technology is key. To an extent, the former of these have been necessitated by the ‘moratorium on evictions’ through Covid-19.
Economic confidence will also prove a key driver of change. There are widespread reports of PRS tenants handing back keys and moving back in with their families. Key life decisions are being delayed, whether due to cancelled weddings or employment status nerves.
The desire for more and better inside and outside space, combined with economic necessities and Covid-inspired nerves have resulted, in many parts of the country, in a correction in the ‘shrinking households’ phenomenon that has accompanied later settling down, and fewer/later lasting marriages, in favour of higher voids. This may not prove permanent, but it will certainly be relevant in the short to medium term.
Investors as consumers, and what they want
While tenant needs are key, there is another relevant group of ‘consumers’, who are acting as investors in the PRS. Side-line landlords have been on the decline due to market and regulatory changes, but what these investors want remains a key driver in the PRS.
What investors want in a post-Covid world is confidence, above all else. This is the currency of the era, and it seems to be worth more than data and oil combined.
They want yield and an inflation hedge. Mass government stimuli and long-term low interest rates are creating an unprecedented appetite for yield. Individual investors in a post-Covid world want this without the increased hassle (for example, more effort around health and safety, and increased need for tenant communications such as that around payment of rent and job security) associated with investing directly.