What impact will Britain’s vote to leave the EU have on the PRS?

Today marks a very important day in Britain’s history. The public vote in favour of Brexit is a shock to many people and has already resulted in a sharp decline in global markets and the value of the UK pound, while the David Cameron has announced that he is to step down as Prime Minister later this year. But what impact will the outcome of the referendum have on the private rented sector?

The economy

Early indications are that the fall in the pound’s value, as well as the stock market, could very well lead to a technical recession, higher unemployment, which in turn may result in a cut in interest rates and possibly even further quantitative easing.

Borrowing rates

A reduction in interest rates could actually lead to cheaper borrowing levels – although this remains to be seen as there are other factors at play.

Transactions

Most experts we have spoken with this morning estimate that there will be an immediate slowdown in housing market transactions, in the order of around 15%, resulting in downward pressure on property prices in the short-term.  

International investors

The dramatic drop in the value of the UK pound will alert many shrewd international property investors, with many buyers from Asia, as well as from the US, looking to take advantage of a more favourable exchange rate and snap up bricks and mortar in the UK.

Property prices

House prices could fall across many parts of the country in the near term as prolonged uncertainty and a potentially weaker economy has an adverse impact on the market. But the general housing shortage means that prices should rise in the medium to long term.

New housing supply

Based on recent comments from leading housebuilders, many residential developers will be less willing to commit to new property projects due to the uncertain economic climate. This will make it much harder for the government to achieve its target of building 1m new homes by 2020. This will add to the supply-demand imbalance, placing upward pressure on house prices and rental values in the longer term.

Rental demand

Both buyers and sellers are clearly anxious, as reflected by a noteworthy drop in sales market activity in recent weeks, and with uncertainty set to continue for the foreseeable future, as would-be buyers adopt a ‘wait and see’ policy, demand for rented accommodation is set to rise.

Rental prices

The cost of renting will rise across many parts of the UK as demand from tenants increases and new housing supply falls. The biggest affect could be in London, where rent prices have been pushed sky-high due to huge demand.

Conclusion

The rental market will carry on functioning healthily despite the UK’s decision to exit the EU. 

https://www.landlordtoday.co.uk/breaking-news/2016/6/what-impact-will-britains-vote-to-leave-the-eu-have-on-the-prs

Rental market to remain unaffected if Britain votes for Brexit

The EU referendum still remains too close to call, but whatever the outcome of today’s vote, letting agents do not believe that it will have much of an impact on the rental market.

A new report from the Association of Residential Letting Agents (ARLA) suggests that supply, demand, or rental costs will not be significantly affected if the UK votes to exit the 28-member state today.

Two thirds (65%) of ARLA agents expect supply to remain stable if the UK votes to leave the EU, compared to just a fifth (22%) who forecast that it will fall as international landlords pull out of the market.

A third (31%) see demand decreasing, as relocating to the UK becomes a less attractive prospect, but over half (55%) think it will remain as high as it currently is.

In London, almost half (43%) of agents expect the number of prospective tenants per property to fall in the event of a ‘Brexit’, as international demand weakens.

While one in five agents (19%) of agents expect a Brexit result will cause upward pressure on rent costs, the majority do not think it will have a major impact on tenants’ rents.

David Cox, managing director of ARLA, commented: “There is no avoiding the EU Referendum at the moment; and whatever the outcome, we are likely to feel the impact of the fallout of this debate in different ways. However, it’s important to put this into perspective and not get carried away in a zeitgeist. As outlined in our recent Brexit Report, the letting market hosts a large number of non-UK born citizens and any change in migration policy is likely to have an impact down the line, especially in London. However, our monthly report clearly shows the sentiment amongst members is that the immediacy of this effect is likely to be minimal.”

Meanwhile, ARLA report that a third (37%) of agents have seen a decline in the supply of buy-to-let properties since the stamp duty changes came into effect in April, with almost half of agents (48%) expecting supply to fall further in the coming months as more landlords walk away from the market as a result of the mortgage interest relief changes coming into force next year.

Cox added: “The EU referendum debate in many ways has stalled policy making and following the vote we need to move from political debate to action. We need supply to increase dramatically and quickly to really deal with the housing crisis as this is one of the most pressing problems facing UK society today.”

https://www.landlordtoday.co.uk/breaking-news/2016/6/rental-market-to-remain-unaffected-if-britain-votes-to-leave-the-eu