During the pandemic, the average cost of renting a property went down. Lower demand and economic uncertainty are some of the key factors in this.
But, according to a report by Zillow, this could be about to change…
Towards the end of 2020, rents began to bounce back, with the average growth being around 1.1%. Plus, in areas with the biggest rental markets, growth was even higher at 2.1 – 3.1%.
The real estate marketplace company suggests that, over the next year, there could be a surge in rents, which could potentially reach 2005 levels as more young people look for properties.
What’s driving the changes?
The changes in the rental market are driven by two main factors: supply and demand, and increases in property values.
Higher demand and reduced supply are, of course, pushing up rents. However, rising property prices are also a significant contributor and the typical house value went up by 3% in the last 3 months in the US – the largest rise since 1996.
In addition to this, new construction projects, including apartments, have slowed during the pandemic, which means the amount of housing available is at a record low.
How the pandemic will affect tenants
As the researchers point out, the news of rent increases could be a disaster for millions of struggling tenants. Despite it being beneficial to landlords, lots of renters have struggled and are facing a loss of income, unemployment, and rising debt.
In the report, one researcher said, “With a vaccine on the horizon and Gen Z continuing to graduate from college, we expect the cloud of uncertainty surrounding the pandemic to lift and demand for rental units to surge in 2021. Further government intervention will likely be needed to avoid a painful wave of evictions.”
Zillow senior economist Jeff Tucker added, “We expect the housing market to continue its bull run from this summer and fall well into 2021.”
“This rapid price growth will be driven by the same factors that took the steering wheel in 2020: strong demographic trends, shifts in buyer preferences sparked by the pandemic, low mortgage rates, and short supply.”