It’s been a rollercoaster of a few days since the EU referendum result was announced and naturally people are asking ‘what does Brexit mean for London’s rental market?’ I’ve had a few conversations with landlords who are concerned about the impact the leave vote might have on their rental investment. Here are my thoughts:
An impact on the number of tenants?
Whilst I don’t envisage a crisis in the rental market, I think that job losses in the city (a few major institutions have already hinted at moving staff overseas) will affect the supply of tenants to the prime Central London market. We could also see a drop in demand from international tenants as less people, EU nationals in particular, choose to move to London
Coupled with city job losses, the local rental market has been challenged in the last 12-18 months by the movement of tenants to up and coming ‘villages’ to the east and west of us and I sense this may continue.
However, we have already been educating clients that they need to respond to this and be willing to take less rent in return for a lack of void period and some certainty in the term of the tenancy. Those with experience have responded well to this.
Buy to let landlords to quit following Brexit?
There has been some speculation (including from David Cox, Head of ARLA) that some buy-to-let landlords would quit the rental market following Brexit. Already facing an increased tax burden, the threat of a fall in property values and increase in interest rates could push many over the edge. If this is the case, then the fall in demand could be matched by a similar fall in supply with the remaining properties left to mop up the diminished pool of tenants.
I’m not certain this scenario will happen, I rather think that many landlords will adopt a ‘wait and see’ approach over the coming months as the many uncertainties are resolved.
No great reduction in rental values
In all honesty rents in Notting Hill have remained pretty static over the past 10 years, moving up and down by 10-15% as a reaction to the economy and market trends and I do not anticipate anything more dramatic than this.
The section of the market that will be punished is the top end where I expect rents on family houses to fall more sharply for a while by around 20-30%.
This price drop had already started to happen pre-Brexit as the top end of the sales market slowed as a reaction to the hike in stamp duty. Uncertainty following the leave vote will sadly serve to compound this.
Short term shock, longer term stability
Many people will continue to rent while the post-Brexit dust settles so I predict that although there may be less tenants around, good properties, priced reasonably will still get snapped up.
However, I do envisage that tenants will tighten their belts while they claim that their futures are uncertain so there will be a lot of negotiations on price.
Of course we will have to wait and see what happens politically in the coming months before we can predict with any certainty when we can expect things to improve but well maintained rental properties will continue to be a solid investment.
If you have any concerns or want to discuss your rental investment, please don’t hesitate to contact me: firstname.lastname@example.org or 020 8962 5912