How Brexit will impact the private rented sector
Published on 25th October 2018 by Laura West
With the UK scheduled to withdraw from the European Union (EU) on 29 March 2019, and despite the deep importance of this event, not much is understood about how the Brexit process will be managed and what will happen if ‘no deal’ is agreed between the UK and EU. Despite this uncertainty, the property market within the UK has proven buoyant and resilient, with residential property remaining in huge demand. But to what extent will Brexit affect the UK’s buy-to-let market?
According to reports, the rental sector experienced a record year in 2017, with the number of renters growing, and the total rent paid to landlords increasing to approximately £1.8 billion. Looking ahead, Brexit is unlikely to undermine the demand for private rented property, as the UK’s exit from Europe will not change the fundamental fact that vast quantities of people wish to rent property across the country, with property often in limited supply. As housing demand continues to exceed supply, demand for buy-to-let properties should remain strong.
A survey from Market Financial Solutions in 2018 discovered that an estimated 53 per cent of investors in the UK would prefer to invest in property and other traditional asset classes over new assets like cryptocurrencies. Around 63 per cent of those questioned regarded property as a secure and safe asset in the current investment market.
As demand for property remains high, there may be other consequences for the buy-to-let market from Brexit. High street banks have implemented stricter regulations to make it harder for prospective buyers to gain mortgages in an attempt to stabilise Britain’s economy and prepare it for the effects of leaving the EU. The recent hike in interest rates will also likely concern prospective property buyers, and may potentially place some mortgage products beyond their reach. Whilst the increases may not seriously affect borrowing costs, it will undoubtedly increase the pressure felt by households, and increase repayment amounts. Buy-to-let investors, when seeking credit from the banks to finance any property acquisitions, could also feel the effect.
However, despite some uncertainty and bleak predictions, it is vital that investors regard Brexit as a potentially huge opportunity for property, which the currently strong buy-to-let market indicates. Conditions have picked up recently, following the immediate impact of the referendum, and according to recent data, the house price average in the UK reached a record high in July 2018 of £230,280, which is a positive indication for those interested in investing in property.
For investors looking to benefit from the opportunities available in the residential property market, there are alternative financing options available to help businesses or individuals overcome the current restrictions on mortgages enforced by banks. Alternative options like bridging using short-term, fast loans, can provide investors and buyers with the flexibility required to secure a property. In a highly competitive market, adaptability is crucial when looking to take advantage of opportunities in the real estate market.
Despite the uncertainty, investors are still drawn to property as an asset which can provide secure and safe returns, and looking ahead to March 2019, the appetite of investors for property looks likely to stay high.
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