large-7646-logo-up-300x180Is Brexit good or bad for landlords?

We all know the song, what does it mean for landlords if we take the ‘out’ option?

  • It is estimated that immigration will reduce and the UK population will be approx. 1 mill less by 2026. In essence this means fewer tenants looking to rent.
  • A lower demand for rental property will affect the rate at which they increase. As purchasing a property is likely to remain out of reach for low to middle income earners for some time demand overall is likely to remain high so rents are expected to continue increasing, perhaps at a lower rate.
  • In a worst case scenario and rents do stop increasing or even drop it is likely to impact on the return on investment for those with mortgages. Combine that with the 2017 mortgage tax relief restrictions and a mass exit of landlords is a possibility. GREAT! tenants say, it may not be so straight forward unfortunately. If this occurred it would reduce Private Rental Sector stock meaning the same number of tenants fighting over even fewer properties and guess what will happen to rent levels? In the long run with more stock coming onto the housing market it will mean property price increases will slow, stop, maybe just maybe even reduce a little. The issue here is affordability,¬† we’d need to see big drops in value before low to middle income earners can get past the strict lending criteria to obtain that all important mortgage. This would be a very bad situation for UK housing in general although I am sure the cause will somehow still be portrayed as landlords or letting agents 😉
  • If reduced pressure on the housing market affected prices as above this could represent an opportunity for investment.
  • On the flip side Brexit could also hit the construction industry hard with a double whammy of higher material costs and fewer skilled workers, likely resulting in a lower rate (and quality) of new builds. In turn a lower number of new builds would affect overall stock levels and could therefore have a negative impact on any reduction or slowing of property prices.
  • It is highly likely there will be fewer foreign investors in the BTL & B2R market and again this could represent an opportunity to UK investors. London will be hit hardest so if we Brexit keep your eye on prices for the first signs of a bursting bubble.

In summary – it really is hard to be certain, Brexit is a step into the unknown. There will be winners and losers but one thing is for certain, it will affect everyone in one way or another.

 

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Best Regards,

julian-sig

Julian Bishop