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What would a no-deal Brexit mean for the UK’s landlords?

Life just doesn’t get any easier for Theresa May. No sooner had her Brexit withdrawal plan been rejected by a record-breaking margin than her government faced a no-confidence vote. The PM survived - albeit by a slim majority.

The one thing almost everyone can agree is that the on-going uncertainty surrounding the UK’s departure from the EU is bad news. And with Westminster seemingly at loggerheads with both itself and Brussels, the prospect of a no-deal – a scenario originally touted as a last resort – is looking increasing likely.

Naturally, this means that landlords and property investors are keeping a watchful eye on political developments; some might be keen to buy more properties, others to sell, but for the time being many are adopting a ‘wait and see’ attitude. But for those not content with waiting for Brexit come and go, we can look to past trends to offer some valuable insight into how we can expect the market to respond to the challenges it will face in the coming 12 months.

So, as the UK heads towards the official Brexit deadline on 29 March 2019, let us review what would a ‘no-deal’ arrangement mean? Moreover, what can we expect from the real estate sector in light on current political and economic events?

A no-deal Brexit

In the simplest terms, a ‘no-deal’ Brexit would see the World Trade Organisation rules on trade replace the current regulations underpinning the relationship between the UK and EU. What concerns many people, however, is the lack of clarity about how this might affect the country’s markets in a practical sense.

Tellingly, the UK property market has withstood a series of major political changes over the past decade – from the financial crisis of 2008 to the more recent 2016 EU referendum. So as we make the final preparations, an analysis of recent trends can provide a useful outlook for those keen to understand how the market is likely to fare over the coming 12 months. 

A resilient housing market

Despite gloomy forecasts of a price crash in the immediate aftermath of the EU referendum, the UK property market has proven to be extremely resilient. Granted, while the rate of growth has slowed in some regions – particularly in London – average property prices have continued to rise across the country as a whole.

The most recent indicator of this positive performance came in December of last year; in amidst the height of political turmoil as Brexit plans were put forward, UK house prices rose by 2.2% - the highest monthly rate of growth in almost two years.

Meanwhile, buy-to-let landlords have also recently enjoyed strong rental yields, with the latest data indicating that asking rents in London rose to a record high in December 2018 as market conditions in the capital improved to levels not seen since Q1 2015.

Looking at the bigger picture, the property market has experienced strong growth for a prolonged period of time. Indeed, despite the aforementioned challenges of the past decade, the average price of a house in the UK has risen from £157,000 in 2008 to approximately £220,000 last year, according to the ONS.

It is important to keep these historical trends in mind, particularly as doom and gloom predictions emerge from some quarters as Brexit approaches.

More new builds

One of the main reasons that property prices have risen sharply in the UK over recent decades is the imbalance between supply and demand; there is simply not enough homes to meet demand.

To address this pressing issue, the Government has set a goal to build 300,000 new homes each year by 2022. Whether it will be successful in achieving this ambitious target is somewhat unclear; however, this is certainly a trend to watch for those looking for buy-to-let investment opportunities in the coming year.

Much of the government’s approach rests on encouraging the construction of new-build properties in rapidly rising urban centres – from growing commuter belt towns to thriving student cities like Liverpool and Newcastle. Meanwhile, the rise of off-plan investment options as a results of these new developments means that these areas are steadily becoming popular investment destinations.

Regional hotspots

Looking beyond London, which is one areas that has suffered as a result of price inflation and Brexit uncertainty, there have been a number of property hotspots around the UK have been enjoying high levels of investment over the past few years; places like Cardiff, Newcastle and Liverpool are but three examples of areas that have benefitted from improvements to their infrastructure and facilities.

Driven largely by year-round demand from students and young professionals, these cities have become popular destinations for property investors. Indeed, growing demand for properties in these areas have driven up prices much faster than the national average.

As a prime example, house prices in Liverpool have risen by nearly 25% over the past five years – and are expected to grow by a further 5% in 2019. The influx of government investment as part of the Northern Powerhouse strategy, coupled with demand for residential properties and student accommodation, has certainly made this a key market to watch.

Looking to 2019

Given the proven resilience of the UK housing market and the promising trends noted above, even a no-deal Brexit is unlikely to shake real estate’s long-term status as a popular asset class.

Moreover, given the continued appetite for UK property among domestic and foreign buyers, as well as the steady rise of new-build properties, there are plenty opportunities on offer for property investors in the coming 12 months.

Jerald Solis is the business development and acquisitions director at Experience Invest, as well as a director at Opto Property Group.

Poll: Are you concerned about the potential of a no-deal Brexit?

PLACE YOUR VOTE BELOW

  • Paul Barrett

    If mass uncontrolled immigration is stpped then there will be a softening very slightly of the market.
    This is because many LL are leaving or reducing their exposure to the PRS.
    There will still be migration as employers refuse to train the staff they need.
    So they poach skilled workers from countries which really need to retain them.
    But now many employers will have to train their own workers.
    There is a shortage of about 50000 HGV drivers.
    When was the last time you saw supermarkets training their own drivers!?
    They simply don't.
    They use thousands of EU drivers and pay peanuts.
    Fewer EU migrants will mean reduced tenant demand.
    In my area if EU migrants weren't here the local rental market would crash.
    Itis simply a fact that uncontolled EU immigration has led to the PRS increasing in capacity to meet that demand.
    Whilst there will still be migration it hopefully will be reduced.
    LL should therefore consider downsizing to meet reduced demand.
    Selling off; deleveraging etc is an effective way for LL to meet the reduced demand for rental property.
    There is also a lot more supply coming to market especially via major corporates.
    LL will have to consider their offer in light of all this corpirate cash.
    Personally I believe it is pointless trying to compete.
    These corporates don't have to suffer S24 which gives them a major unfair competitive advantage.
    So LL would be advised to invest in areas and property types that corporates aren't interested in.
    Most corporates are only interested in city centre flat blocks.
    So LL would be well advised to let the corporates have that market.
    Migrants especially like that sort of property type and location.
    But as the BrExit economy reduces fewer migrants will be needed.
    There is still strong rental demand; it just won't be increasing.
    Time for LL to consolidate and prepare for a looney Corbyn led Labour Govt.

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    When was the last time you saw supermarkets training their own drivers!?
    Lidl and Aldi have been doing it for about 2 years and other companys also - too many to name.

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    I am so sick and tired of so many people saying negative things about Brexit. The EU immigrants will be back because there will be the work available, the NHS, the free gov handouts. I can keep going on and on but many know what I am stating is true. Many forget the UK wrote the Humans Rights Act and gave many of the legislations to the world. The EU decided to put twists and turns into them because they don't like the UK. Germany is nearly in a recession. Many of the rest of the EU is broke and they are about to let at least another five more countries into the EU and expect the UK to pay. Get out - get stronger - and stop giving our money away.






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    Italy, broke, Greece broke, Spain nearly broke, no financial records forthcoming since inception, why wouldn't you want to stay in the EU?

     
  • Paul Barrett

    Yep chaps BrExit can't come soon enough as far as I am concerned.
    I really don't care if tenant demand reduces.
    Let us sell to FTB and as the PRS rapidly reduces in size and capacity perhaps Govt will get off out backs and abolish all the stupid anti- LL policies edpecially the bonkers S24.
    Apparently a Starbucks has recently closed somewhere.
    Yippee no low paid work for EU migrants. But apparently a UK based independent tax paying coffee shop opened nearby.
    Wish Starbucks would just get out of the UK.
    They are no use here.
    That would mean no requirement for lots of low paid migrants only kept viable because of WTC.
    Who cares if all the non- tax paying shops p### off.
    I won't miss them.
    I deliberately avoud using any of those that use the perfectly legal tax avoiding transfer pricing strategy.
    The sooner local independents return payinng proper wages the better!!
    We do not wish to be any part of a politically and economically suspect behemoth.
    Can't wait to have rid of the EU.
    Europe not a problem.
    The EU a very big problem.
    Essentially a bankrupt institution kept afloat by an increasingly struggling Germany.
    Wonder who will buy all those 850000 cars that the UK currently buys.
    I'm sure the UK could manage perfectly well without very expensive German machinery.

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    leaving the EU doesn't worry me, sure we will survive very nicely.

    Paul Barrett

    They won't when we leave the EU.
    Perhaps then they might not be as competitive.
    Only time will tell.

     
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    lidl and aldi get eu subsidies

  • Paul Barrett

    Wonder what will happen the when we leave the EU!?
    Perhaps prices will have to increase at these German supermarkets.
    It would be bizarre if the only reason these two supermarkets were surviving due to EU subsidies.
    Of course the main reason why Corbyn actually wants out of the EU because he doesn't want to be subject to EU State Aid regulations which would prevent his Communist enterprise if Labour get into power.

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