Thursday 2 April 2020

The merits of a periodic tenancy during a COVID Crisis

Well this is a short topic - there’s none!

As my colleague investor discovered when a portfolio he purchased (literally just a week before this all kicked off), statutory periodic tenancies allow a month’s notice from the tenants’ side, so basically it’s left him with a load of empty rooms which he can’t view during the notice period, and likely voids after this lockdown we find ourselves in.

You may need to refer to my previous video slamming periodic tenancies; personally I would never allow a tenant to go periodic because I want to retain control of when my properties might come back to the market. After all, I want the best returns. I want the easiest life, so I choose to let my properties during the peak (in terms of demand and hence price) of the year.


So what happened In this instance? A lot of these properties were let on a multi-let (room-by-room) basis, and as it happened they were initially let on a fixed term which had since expired, so they were are “holding over” on a month-by-month basis. Nightmare scenario for my friend since he received notice for about 6 rooms in various houses. All of these were young (younger than 25) professionals in Clapham and surrounds who found it a wise decision to move back home to their parents. I can’t blame them really, they have to work from home anyway, so their parents’ place is likely to be more spacious and since we can’t go out and see our friends or have to travel in to work it’s a great cost-saving exercise.

What about fixed term tenancies?
Well erm my stance (pro-fixed term) isn’t fool proof. I for one have a few multi-lets where some overseas nationals have returned home because they have no job at all, nor a prospect of finding a job in the foreseeable. I’m talking baristas, cleaners, labourers, retail employees. Thankfully this presents a very small percentage of my portfolio.

What does this mean for the market - bigger picture?
Well for one, all these professionals that have moved home - when life gets back to normal and people need to go back to the office on a daily basis all they will need to move back. Perhaps this will create an even higher level of demand this summer, especially the earlier part? That said a further, and longer-term, gap has been created by the lower skilled demographic, leading to less people in the market overall. However... these two types of tenants are unlikely to be chasing the same (type/priced) property.

So if you are renting out cheap and cheerful to the lower skilled you may well struggle - to get people in for one and secondly at the price that you want; even though historically I’ve found the cheaper it is the quicker it goes, regardless of quality. I think once people in first white collar jobs return the demand in that segment will settle back to normal. As for demand right this second - well it’s lockdown, people just aren’t moving at all really, not even viewing unless they’re absolutely desperate. Longer term, I foresee a significant decrease in demand for the lower end stuff due to the exodus of young, lesser skilled immigrants. This will pick up when the economy starts moving again; when will that be? The building/cleaning trade, retail etc - this will all take time to get going again. People aren’t going to be spending £3 on a coffee that frivolously in times of “austerity.” The word “recession” has already been mentioned on social media frequently, and let’s face it, it’s here - even though a recession is defined as a fall in GDP for two successive quarters.

So what will actually happen is anyone’s guess - I’m sure however we’re going to see demand come back this summer, to what extent is uncertain.

Do stay tuned for property investment tips/tricks and updates and by all means do check out the DownToSouthLondon YouTube Channel for entertaining and informative videos to help you invest with confidence! I also offer coaching on a one-to-one basis so if you are looking to get into property investing and require personal guidance then head on over to www.jeroenhoppe.com.









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