We looked a couple of months ago at what a Brexit decision might mean for the UK property market, and now with this month’s EU referendum looming large on the horizon, landlords’ thoughts may well be turning more specifically to what the decision could mean for them and for the UK buy to let market. Research earlier this year by global property adviser CBRE found that nearly three out of four property investors think Brexit would make the UK a worse place to invest.
It’s safe to say that a decision to remain would have little impact on the economy as a whole, including the rental property market, although we could see a bit of a “catch up” effect from investors who have been waiting for the outcome of the vote before making their investments. This happened after the Scottish independence referendum as investors waited to see the result of the poll before making a move.
But a leave vote would have far-reaching implications on the economic outlook and it’s likely that we would see an effect on the buy to let market, at least in the short term.
Of course, it’s difficult to see any prevailing trends coming through that could be an early indication of what might happen in the event of a decision to leave, given the massive surge in Q1 and subsequent lull brought about by the hike in stamp duty that came in at the end of March distorting the market somewhat. But what we have seen is that when former London Mayor, Boris Johnson, announced his support for the campaign to leave, the Pound fell to a seven-year low against the US Dollar, suggesting that confidence in the UK economy may fall if we do end up with a Brexit in the polls next month.
This is likely to have an effect on the prime London buy-to-let market, where foreign investors have boosted the market with purchases. London property investment is seen as a “safe bet” by many, but if Britain is no longer a part of the EU, investors may be less eager to choose to invest in its capital.
But what about other parts of the UK? With George Osborne’s Northern Powerhouse initiative, England’s northern cities came to the attention of international investors, particularly the Chinese, given their higher average net rental yields than London. So, if foreign investment drops in London as a result of a Brexit, it’s likely that we’d see the same in those Northern cities, ultimately leading to a cooling of the market. We’d be watching with interest then to see what the government’s next move would be.
Even if you’re a small investor and not overly concerned about the impact on your own portfolio, the one thing we can be pretty sure about is that a Brexit decision is likely to result in regulatory changes to buy to let mortgage lending and potentially changes to the legal aspects of being a landlord, and that’s where we can help as we will be keeping ahead of the game as and when any changes come in.
If you need any help with legal matters relating to your buy to let properties, either now or post referendum, get in touch on 0333 577 9050 and one of the team will be happy to chat. You can also tell us your thoughts on the likely outcome of the polls by tweeting us @legal4landlords. We’d love to hear your views!