Brexit: what does it mean for the property market?
Indecision over Brexit is having an impact on the property sector, but what are the biggest issues affecting the market and landlords in particular?
Despite a planned exit date of March 29, Britain’s proposed departure from the European Union remains very much up in the air. At the time of writing, Theresa May is meeting with other party leaders following the emphatic rejection of her Brexit deal in the House of Commons. After the Commons defeat, May then overcame a no confidence vote tabled by Labour counterpart Jeremy Corbyn and she has since been working to propose a viable alternative which gains support from MPs.
Discussions of a second referendum and the consequences of a ‘no deal’ Brexit abound. However, with the House of Commons in disarray, the latest option gaining popularity seems to be an extension of Article 50, providing the government with more time to establish a deal which has political and public support. Whatever the outcome, the Brexit saga has unsettled the property market and will likely continue to do so for the remainder of 2019 and possibly beyond. With this in mind, it’s time to take a look at some of the property market issues and talking points being caused by Brexit…
More tenants if the sales market suffers?
One of the country's best-known tenant referencing providers, HomeLet, has said that Brexit uncertainty could provide an unexpected boost for landlords as consumers opt to rent instead of purchasing a property in an unstable market. Martin Totty, the firm's chief executive, says that low-level house price growth and expected interest rate rises, combined with Brexit, will continue to discourage people from buying imminently. He expects the trend of rising rents and demand for rental homes to continue throughout 2019, despite the current political situation. According to a HomeLet study of over almost 3,000 landlords, nine out of 10 intend to keep their existing portfolio or expand it over the next year. However, a third of respondents expressed concerns about the potential implications of Brexit.
Empty homes during a housing crisis
According to an asset protection specialist, the uncertainty around Brexit is likely to lead to a rise in vacant properties. This is something which could be damaging to the housing market when there is already a nationwide shortage of homes to buy or rent. VPS Security Services says that property investors and developers will be reluctant to move forward with their strategies while the prime minister continues to deliberate on a final Brexit plan. It says that there are currently over 200,000 homes that have been empty for six months or more and that this number could increase over the coming months. "Empty properties of any type can be a significant cost to the owners, local authorities and to the environment," says Phil Bunting, director of VPS Security. "They attract vandalism, metal thieves, arsonists and squatters far more than occupied premises."
Could the wait and see approach affect landlords too?
Although, like Martin Totty, many industry suppliers are predicting a lull in property buyers to provide a boost to rental demand over the next few months, it may not be all plain sailing for the rental market. There is the obvious conclusion that Brexit will discourage EU tenants - who make up a significant proportion of the rental population in London - from moving to the UK. On top of this, some EU residents currently residing in the UK may look elsewhere once Brexit becomes a reality. What's more, the wait and see approach adopted by home movers due to Brexit uncertainty could also be mirrored by those already residing in rental properties. This, combined with tenants waiting until June when they no longer have to pay upfront fees to agents, could bring about a quiet few months for the market and a lack of demand for landlords with available properties to fill. There is also the concern that if the Brexit fallout causes significant damage to the UK economy, this could have a knock-on effect on employment levels which could subsequently bring about a rise in rent arrears.
Certainty is needed soon for all market stakeholders
For the nation’s landlords, investors, letting agents and tenants, the sooner the Brexit deal is sorted or otherwise, the better. The market can then look to resume normal service and grow at the levels seen over the last few years. Despite the doom and gloom currently circulating, it’s important to remember that property remains one of the most profitable asset classes and that the private rental sector has grown to account for around a fifth of all households. What’s more, the market has learnt to deal with unpredictability and instability in recent times and people will always need somewhere to live and move around accordingly, regardless of what is going on in Westminster.