When I run out of ideas for blogs, my friends at Affinity Media, who look after our website and SEO work, make suggestions to me about what they think people want to hear about. I was in such a position this month and they suggested that I write something about Brexit. If ever I dreaded a suggestion, it was this. I was never sure why we had the vote in the first place, other than to secure another five years in office for Mr Cameron. I always knew which way I would vote, that was never in any doubt for me, but the result and the subsequent carnage, well nobody predicted that! So why does someone think I can predict what is going to happen in the rental market?
Well if nothing else I can tell you how it feels on the ground. Whilst we don’t do sales at City Lettings (hence the name)I know enough people in the industry to tell you that the sales market is struggling. Instructions are down, average viewings per property are up and prices have dropped slightly. I just don’t see many deals being done!
Whereas the rental market remains extremely buoyant. Don’t get me wrong we are not seeing as many landlords queuing up to pay the 3% extra SDLT and pay more tax once the relief is phased out. However our new instructions are not down. We have picked up some business through the poor service of other agents, we are still seeing accidental landlords entering the market and some landlords are biting the bullet, paying the additional SDLT but taking advantage of some of the fantastic buy-to let mortgage deals that are out there. Yes the figures can still stack up!
So we are still getting new properties but what about tenant demand? This is as high as I have ever known it over the last ten years. If a property is well located, is not over-priced, is clean and well presented then it goes within the first five days of advertising it and we can usually put more than one offer to the owner. Happy days! Well happy days for landlords, not tenants who are increasingly finding themselves being “pipped” to the home of their dreams.
The Future (hold on, whilst I just put me crystal ball back in my desk drawer!)
The key word around Brexit is “uncertainty” – we are going into uncharted territory and the financial markets and lenders hate uncertainty.
The uncertainty is likely to weaken a buyers resolve to commit to a purchase and in addition lenders are already tightening their lending criteria, loan to value and income ratios, so despite some great mortgage rates this may lead to a slow down in the property market which we are already seeing in Norwich.
Similarly in the rental market, landlords who are already dampened by the recent punitive tax measures will probably cool further when faced with more political and financial uncertainty. This may be offset by people feeling trapped by the lack of movement in the property market leading to more accidental landlords.
Personally I don’t see tenant demand changing much. Even if we got 20% less enquiries overnight this would not be a bad thing as we are seeing unprecedented demand and it would simply mean 20% less people to ring and tell them “sorry, you haven’t got it, the landlord went with another couple” or “sorry, we took money on it yesterday”.
The government have taken some great leaps in trying to encourage first time buyers with their Help to Buy programme and this will undoubtedly help some tenants get on the property ladder but unless there is a major shift in the entry price for houses then I would suggest that the tenant demand will continue to outstrip supply. This in turn suggests that rents will continue to increase as well, provided wage growth is not constrained by Brexit.
There is so much uncertainty around Brexit and so many dynamics that I would rather put a bet on Leicester winning the Premier League again (currently 1000-1) than trying to predict what will happen next. What I do know is it will take a major flux to see the dynamic of demand outstripping supply switch. But likewise, I wouldn’t dismiss it altogether!
To get more information on what Brexit could mean for you as a landlord or potential buy-to-let investor, get in touch with the team today by visiting our contact page or calling 01603 499258