At 11.00pm tonight the UK will officially leave the EU. Initially there will be no obvious change as we move straight into an 11 month transition period. This will come to an end on 31 December 2020, either with or without a trade deal so, going forward, there may be something of a bumpy ride for the property market while the government negotiates terms.
Last year, according to RICS figures, Brexit uncertainty hit the housing market to the tune of a £5000 fall in average prices. However, since the general election in December, the property market seems to be experiencing something of a so-called “Boris bounce” with prices now going up and an increase in numbers of mortgage approvals.
Of course it’s impossible to predict how long this might last. Any instability in the market over the coming months is likely to make potential buyers more risk-averse, leading to fewer transactions. But if fewer people are buying, this will prove positive for the rental market. Renters may decide to stay put rather than move onto homeownership. Bad news for housing transactions but good news for landlords and letting agents. Also, for canny investors, any dampening of house prices means the possibility of picking up a bargain.
The Bank of England has decided to leave interest rates untouched for the time being but in the coming months, mortgages may be affected by Brexit. Some commentators have suggested the base rate could go up post-Brexit, making buy-to-let mortgages more expensive. On the other hand, as one press report recently pointed out, once we no longer have to abide by EU Regulation, some laws such as the Mortgage Credit Directive – which enforces uniform borrowing rules across all EU member states – could be repealed, opening up the possibility of more flexible lending. And, of course, if mortgages become harder to obtain for potential purchasers, that too will ramp up demand in the rental market. So, once more, landlords could stand to gain.
While the Government moves on to negotiate a trade deal with Brussels, accountants KPMG said in a report last year that whatever the final outcome, the London market is likely to be most heavily impacted by any post-Brexit economic shocks.
For landlords, with the future still far from certain, the key to ensuring profitability will be to keep rental homes well-maintained and effectively managed and to make sure they stay ahead of the curve on compliance. With the biggest shift of the economic and legislative landscape in most of our lifetimes now in sight, it will be vital for us all to remain alert to changes in our markets and the legal framework moving forward.