The Prime Minster has stepped down, the pound has plummeted and millions has been wiped off the London stock exchange. In the wake of this financial volatility what does Brexit hold for landlords and letting agents? Will it be another blow for the beleaguered buy-to-let market or does this unprecedented shock offer opportunities for the rental sector. The next two years will be choppy waters for the UK economy as we negotiate our way out of the EU. As we enter this unchartered territory property pundit opinion is divided on how this shock will reverberate with the buy-to-let market.
Falter or Fall?
According to many economic commentators the initial impact of Brexit will see a decline in house sales and a deceleration in house price growth. Economic uncertainty in the wake of the referendum will prompt many potential buy-to-let investors to hold off to see how interest rates and property prices will pan out in the months, or worse yet, years ahead. According to Kate Faulkner, a property expert, this ‘wait and see’ approach will cause a faltering of the property market such as was seen with the Euro crisis and the gulf war. But will this faltering become a fall?
Calming the Storm
In the last week many property experts have shifted opinion and believe that Brexit won’t necessary mean additional woes for landlords or have an adverse effect on the private rental sector. However, in the wake of Brexit many have cautioned against knee-jerk reactions that could destabilise the sector.
The Governor of the Bank of England echoes a similar sentiment saying there will be an inevitable period of uncertainly and adjustment in the months ahead. However, the UK economy is strong and the Bank of England has put in place the necessary contingency plans to weather the post Brexit vote storm. Banks will continue to lend and it will be business as usual in the mortgage sector.
A similar sentiment comes from the Council of Mortgage Lenders who are urging buyers to keep calm as “the more quickly the markets resettle, the lower the impact of the housing market”. Stephan Beech, from Beech Holdings, a property development company, says this uncertainly will only last couple of months as the UK property market is resilient and has the “safest and strongest legal system” supporting it.
Many economic experts point to how the market volatility post Brexit illustrates the stability and security of property and buy-to-let investments. Within this context many estate agents are now predicting an upsurge in demand for rented accommodation as cautious buyers hold off on becoming homeowners. This increased rental demand could also be bolstered by an upsurge in migration before we withdraw from EU mobility agreements. The Association of Residential Letting Agents and the National Association of Estate Agents both believe that in the short term rents will remain stable and the buy-to-let market will come through despite an initial faltering.
Many commentators believe this will be most certainly the case in the Northern Powerhouse where rent yields produce income well above bank interest rates. Despite Brexit experts are still predicting that rental income in Manchester will rise by as much as 22.8% by 2020.
Property pundits are also bolstered by the prospect of a new Chancellor who could redress the stamp duty hikes and tax treatment of landlords, which would boost the buy-to-let market in the event of any market collapse.
Charting a New Course
At this stage it is hard to know what the full effect of Brexit will be for landlords and on the rental sector. There will no doubt be regulatory and legal implications that will change the landscape of buy-to-let. However, much depends on the deal that is negotiated for our exit. That deal will depend hugely on the leader who takes the helm and charts a new course for the UK economy outside of the EU. During this time we will be here to help you make sense of this new buy-to-let environment. We will bring you updates as they happen and identify how these changes will impact you as a landlord or letting agent.
In the meantime, in those immortal words our advice is, keep calm and rent on.
As always please get in touch if you have any thoughts on this. Call us on 0333 577 9050 anytime.