Could leaving the EU lead to a lull for landlords?
by Ed Firmin
Posted on Wednesday, June 22nd, 2016 at 17:46
Could leaving the EU lead to a lull for landlords?
With the growing anticipation about whether or not Britain will leave the EU, we take a look at the potential impacts of a Brexit on the UK lettings market.
The housing sector has been steadily recovering since the 2009 property slump and landlords have been enjoying a healthy lettings market as a result. However, according to a recent article in The Guardian, landlords fear that leaving the EU will lead to a decrease in rents as house prices begin to plummet.
So while on the face of it, falling house prices may seem an attractive prospect to landlords wishing to increase their portfolio, the demand for rented accommodation will actually decline as first-time buyers start to compete for the same affordable housing. And for landlords who rely on rental income to cover the cost of purchasing the property in the first place, there’s simply no point in snapping up a bargain if there are no tenants around to fill it.
So what are the implications if Britain decides go it alone:
- Average house prices will be worth £2,300 less by 2018 compared to current projections
- The UK population will be 1 million less than currently projected by 2026, reducing the demand for buy-to-let properties
- Immigration will fall, which means there will be fewer people looking for properties to rent. Both student lettings and private lettings will be affected as EU nationals currently account for a significant proportion of the total UK rental market. In college and university towns such as Canterbury, the lettings market has always thrived on a diverse mix of students from both the UK and other EU countries
- Monthly rents are likely to fall in line with demand
- The construction industry will be adversely affected as there will be fewer skilled labourers available to build properties. This will lead to a limited housing stock – regardless of future housing requirements
Interestingly, despite all of these factors, both the NAEA (National Association of Estate Agents) and and ARLA (Association of Residential Letting Agents) are split when it comes to making a decision on whether Britain should stay or go.
It’s certainly a testing time for the lettings market as investors are already withdrawing from the sector in fear of what might happen in the long term should Britain leave the EU.
Only time will tell, but it seems as though a vote to leave may well jeopardise the lettings market as we know it – with a looming if not lengthy lull for landlords. However, having said all this, no one can know for certain exactly what will happen and if these projections will come true.