Covid-19 and housing crisis drive demand for better rental properties

While draw of home ownership remains strong, rental sector also plays crucial role

The current shortage of supply was evidenced by the fact that 39 per cent of those surveyed had been looking for accommodation for more than two months. Photograph: Bryan O’Brien

The current shortage of supply was evidenced by the fact that 39 per cent of those surveyed had been looking for accommodation for more than two months. Photograph: Bryan O’Brien

 

At a time when housing market concerns are top of the agenda, the findings of Knight Frank Ireland’s research into the preferences of the occupiers of rental accommodation give some interesting insights into both renter preferences and to the evolving requirements facing the development sector.

Investor demand for assets in the private residential sector gathered more momentum in 2021, making up 50 per cent of total investor spend in the second quarter. The demographics and the economic profile of Ireland indicate that demand for residential assets is set to remain competitive, making the preferences of the end users critical when making investment decisions.

So what do renters want? How long are people planning on renting and do they intend to leave the rental market? If so, why? Why rent and not buy? What impact have Covid-19 lockdowns and working from home had on preferences? What amenities are expected? These are just some of the questions we asked in our third annual survey of those actively looking for rental accommodation which was carried out in association with daft.ie*.

The findings

Renters are divided into seven categories, based on age and stages of life. This allows for some very interesting analysis, specific to each category.

The findings give clear insights as to what the preference between houses and apartments is across the different categories and what the rental expectations of each are. Nesters (25-49 year olds looking for their own place to share with a partner) are the most active, followed by soloists (25-49 year olds looking for a place of their own). Together these two categories make up 51 per cent of those looking for rental accommodation. While apartments remain the first preference for both of these categories (54 per cent and 67 per cent respectively, it is less than in 2020, at the start of Covid-19, when 66 per cent of nesters and 75 per cent of soloists would have preferred to rent an apartment). Each of these categories expect to pay more if they move.

This reflects the impact of Covid-19 and the impact of working from home. Looking for a larger/better space is now the number-one reason for moving, followed by what the different categories of renters can afford, which was the number-one reason the previous year. Fundamental factors such as what is affordable for each category is the top factor when choosing a location, followed by proximity to transport and proximity to work.

Affordability

The matter of affordability comes up in many forms in the analysis and is more of an issue for some categories of renters than others. The previous survey results at the start of Covid-19 strongly reflect concerns about job losses and the economy and showed that affordability concerns were more acute. These concerns were less evident in the 2021 results, with renters more concerned about supply issues and the type of space, amenities and on-site services that may come with it. The current shortage of supply was evidenced by the fact that 39 per cent of those surveyed had been looking for accommodation for more than two months. The demand for high-quality accommodation, meanwhile, is reflected by the finding that on-site amenities are important to 57 per cent, while the ability to receive parcels regularly and 24-hour security have moved further up the list of requirements.

While concern about having a mortgage deposit is still the top reason why people are renting rather than buying, it represents only 38 per cent, compared with 51 per cent in 2020, reflecting increased savings during lockdown. Lack of properties to purchase is the second main reason people are renting.

Location

Location preference for rental accommodation in the suburbs is highlighted in the findings, reflecting a number of lifestyle factors, some of which have been accentuated by Covid-19, such an increase in the importance of green spaces. Preference for city-centre accommodation is expected to increase further as employees and students get back to offices and colleges in the second half of the year, bringing the structural problem of a shortage of supply to the fore.

Where people expect to rent is not necessarily where they would ideally rent and, for some, renting gives an opportunity to live in an area in which they would otherwise not be able to afford to live. While 67 per cent say they would leave the rental sector to buy, 10 per cent say they are planning on renting for 10 years plus or even permanently. Both older and younger families have a clear and increased preference to rent houses. Almost 70 per cent of the twenty-something students or those in their first jobs want to rent apartments.

The outlook

Rental expectations differ across each category, with the findings from the beginning of Covid-19, which indicates that renters expect to see the fall in rents witnessed at the outset of the pandemic largely reversed.

The private rental sector is complex and faces many challenges, but it remains critical to sustaining the success of Ireland as a location of choice for international businesses, employment and value-add across multiple sectors. As with any complex problem, there is no one-size-fits-all solution. Different categories of renters have different requirements and different product offerings are, and will continue to be needed to meet this demand. A workable vision that meets the accommodation preferences of all categories needs to be a key component of planning, development and investor strategies going forward.

* Renters were surveyed over a three-month period (February-April 2021) and this year we had the largest number of respondents (3,000 plus) giving a wealth of data upon which to analyse and identify key drivers in the market place. This year’s survey was also able to capture the impact that Covid-19 has had on renters.

Joan Henry is chief economist and head of research at Knight Frank Ireland

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