Updated: 24th February 2021
With property prices increasing for the fourth consecutive month in February, the future looked bright for landlords up and down the country. However, the explosion of the coronavirus outbreak which has now found its way to our shores has cast a huge shadow across the buy to let market, and landlords are left fearing the worst.
Letting through Airbnb can often be an extremely lucrative endeavour; however, its success relies on two major markets – those travelling for leisure and those on business trips. When the coronavirus crisis first hit, the travel sector was one of the first to be impacted. Holidaymakers were hesitant to arrange trips under growing uncertainty, while businesses curtailed external gatherings in an effort to limit the spread of the disease amongst their workforce, encouraging virtual meetings and conference calls as an alternative. As a result the demand for short-term and overnight rentals plummeted.
It is not just those letting through Airbnb that are braced for a drop income, however. With universities across the country poised to remain closed when the new academic term starts in the Autumn, the student let market is also in a potentially perilous position. Many lecture theatres were closed before the end of the last academic year, with classes moving to virtual environments in an effort to limit social contact between students. While the coronavirus crisis continues, many are preparing for this being the future for university education for the foreseeable future. With no need to be stationed on campus, many students are likely to make the decision to remain in the family home rendering their student accommodation surplus to requirements. Should this crisis drag on into the new academic year the prospects for student landlords could be catastrophic.
Additional problems could also be on the way for landlords as the government has bowed to increasing pressure to provide tenants with protection should they default on their rent at this time. Emergency legislation via the Coronavirus Act put a complete ban on evictions for both social and private renters for an initial period of three months until the end of June. This has now been extended and is set to end 31 March 2021. This means landlords can only use Commercial Rent Arrears Recovery (CRAR) if they are owed a minimum of 189 days of unpaid rent. This could leave landlords in a perilous position whereby they are faced with receiving reduced income from tenants, while their mortgage payments and other outgoings remain constant.
Compounding the problem is that no one knows for sure how long the situation will continue, nor what the future will look like once the epidemic eventually passes. Estimates vary between experts, making it extremely difficult to plan ahead with any degree of certainty. While landlords may be able to cope with a few weeks of vacancies, should this stretch into several months, the situation may be too much for some. With income taking a sharp plunge, yet overheads and outgoings remaining constant, many will find themselves in dire straits and in need of professional help.
Begbies Traynor can provide expert guidance, advice, and comprehensive support to landlords who find themselves facing financial distress as a result of COVID-19. With a network of business rescue, recovery, and turnaround experts located across the country, you are never far from specialist help.