How could a no-deal Brexit impact UK landlords?

Published on 8th June 2019 by Laura West

As confusion around Brexit drags on, with deals rejected and PM Theresa May fighting off a no-confidence vote, the saga continues to impact industries across the UK.

With Brussels and the UK government still at loggerheads, the prospect of leaving the EU with no-deal looks increasingly likely. As with all political events, property investors and landlords are keeping a vigilant eye on Brexit developments, with some eager to buy more homes, others to sell, and the rest adopting a stay put attitude.

By analysing past trends, valuable insight can provide predictions on how the market could respond to these challenges in the next 12 months.

A no-deal Brexit would mean the UK enters into World Trade Organisation rules, which would replace current trade regulations that underpin the relationship between the EU and UK. The property market in the UK has withstood a range of major political changes during the last ten years, including the EU referendum in 2016 and the 2008 financial crisis.

Despite gloomy predictions of price crashes after the referendum result, the property market has proved itself to be incredibly resilient. Despite the fact that the rate of price growth has slowed down in some regions, such as London, the average house price has continued to increase across the UK.

The most recent sign of this was the positive performance of house prices in December 2018, at the peak of the political turmoil when plans for Brexit were put forward. In fact, property prices increased by 2.2 per cent, which was the highest rate of monthly growth in the past two years.

Meanwhile, landlords have also enjoyed healthy rental yields recently, with the latest data showing that the asking rental price in London increased in December 2018 to a record high, with market conditions improving to levels last witnessed in 2015. Online property management software has proved vital for letting agents to manage investment property.

When analysing the larger picture, the UK property market has witnessed strong growth over a prolonged time period. Despite the challenges of the last ten years, the average property price in the country has increased to £220,000 in 2018, up from £157,000 in 2008. These historical trends must be kept in mind, particularly as negative predictions cloud the sector.

One of the key reasons behind the sharp increase in property prices is the imbalance between demand and supply – there are not enough properties to meet demand.

To solve this issue, the government pledged to construct 300,000 new homes every year by 2022. It is currently unclear whether this ambitious target will be achieved, but this is a project to watch out for, especially for those searching for opportunities to buy-to-let in the next year.

A number of hotspots for property investment have sprung up across the UK, such as Liverpool, Newcastle and Cardiff, driven largely by demand from young professionals and students.

Taking into account the UK housing market’s proven resilience and some promising trends, it is unlikely that a no-deal Brexit could change property’s long-term reputation as an attractive asset class.

With a continued appetite for property among foreign and UK investors, alongside a steady increase in new-build homes, there will be plenty of opportunities for investors in the next 12 months.

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