WHAT WOULD IT MEAN FOR THE VALUE OF YOUR PROPERTY AND THE FUTURE OF BUY TO LET?
The forthcoming European referendum has left many homeowners and Buy to let Landlords bewildered with what the impact a European exit could have on the value of their properties and rental income. This is due to the vast amount of information and conflicting messages from the In and Out Camps.
The National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (Arla) have estimated that the population of the UK will be a million less than projected by 2026 if the vote were to sway in favour of a Brexit. It is also thought that the move would depress future price rises leaving the average UK house worth £2,300 less in 2018 (£7,500 less in London). In addition the report states that a population decrease will see a fall in the demand for buy-to-let properties. The report further remarked that lower immigration would also impact rental prices. UK residents born in other EU countries are far more likely to be private renters. Therefore if fewer EU nationals move to the UK in the long term there may be a noticeable impact on demand levels.
The fact that rent costs could face downward pressure can be perceived as a blessing and a curse. While renters could face fairer and reasonable prices, landlords need to be able to at least break even on any outgoings they have, such as a mortgage. If demand eases to such an extent that landlords cannot recuperate costs, the likelihood of a mass exit from the market, which would then just have the opposite effect on demand as supply falls.
The Associations report further remarked that a Euro Exit could provide first-time buyers with a sustained period of breathing space as demand for housing eases off, however it warned that Brexit would most likely hit the construction industry hard, jeopardising plans to build more houses.
Mark Hayward, the managing director of the NAEA, said: “An out vote could mean that in 10 years’ time we’d find ourselves with a severe skills shortage of construction workers. So even if we then had planning permission, investment and materials to build more housing, we simply wouldn’t have the resource to put the bricks and mortar together. It has the potential to have a very damaging effect on the future housing market.” It is documented by the ONS (Office for National statistics) that one in 20 workers in Britain’s construction industry were born in non-UK EU countries proving that they are vital in filling the skills gap.
The forecast that Brexit will result in lower house prices follows similar warnings by the International Monetary Fund. Last week, Christine Lagarde, the IMF’s managing director, warned that quitting the EU would result in house prices and on stock markets. The London property market would be particularly affected by Brexit, according to the NAEA/Arla report. It said that in 2013, 17% of overseas buyers in London’s prime property market were EU nationals. The report stated that the impact of the market uncertainty is especially pronounced in the London market as property in the capital has often been considered a safe haven investment. London could be at risk of losing this status if it enters an extented period of figuring out its economic and political standing post-EU membership.
Despite the findings from their report the NAEA and Arla, which together have approximately 15,000 members, have refused to endorse either the remain or leave campaign stating that their members are split on the issue.