As negotiations continue, there is still much debate surrounding Brexit and how it will impact the property market and the British economy as a whole. So, how will it affect buy-to-let (BTL) investors?
It has been suggested that with less migration from Europe there will be less demand on the housing market and therefore less opportunity in the rental space. The fact is, however, that there is a continuing shortage of housing due to chronic undersupply, coupled with high property prices and mortgage restrictions, meaning that more people are going to be renting, moving forward.
There is also an increasing number of tenants who are choosing to rent because it gives them flexibility. University graduates now opt for the ability to leave a property at short notice to work in other parts of the country (or world, even). Unlike earlier generations, they tend not to want to be bogged down by a mortgage so early on in their careers.
The rental market, therefore, will remain strong. The problem, however, is for buy-to-let landlords who are wary of protecting their profits in light of increasing taxation, stricter lending and increasing regulation. The government has sent out a clear message that it wants to slow down the private buy-to-let market, despite a national housing shortage.
Figures from the Bank of England show that while there was an increase in new residential mortgage lending activity in the first half of 2017, the share of BTL lending decreased to 12.5% in June 2017, which was the lowest percentage since Q3 of 2013.
It appears the government’s strategy is working. A significant number of individual landlords and investors quit the BTL market last year, thanks to higher stamp duty costs and the phasing out of mortgage tax relief. Again in 2018, estate agents reported an increase in landlords selling properties across their branches.* The good news? With some landlords deciding to move away from the rental market, demand for remaining properties has fiercely increased, meaning many landlords are experiencing additional interest in their properties and, in some cases, demanding slightly higher rents.
We believe the government is misguided, pushing landlords despite the fact they provide much-needed affordable rental accommodation across our towns and cities. What is clear, though, is the property market is shifting and for those investors and landlords with larger portfolios, it is easier to ride the storm and absorb the tax changes.
Ultimately, it is not Brexit that is posing the biggest risk to the rental market, but government intervention, so landlords and tenants alike ought to stay up-to-date on progress within the property market as a whole. However, with landlords benefiting from mortgage rates still nearing an all-time low and tenant incentives such as Leaders and Romans’ ‘No Deposit Option’, helping more tenants get on the rental market, there continues to be plenty of room for landlords and tenants alike, regardless of ongoing Brexit negotiations.
*According to ARLA Propertymark