It has not been an easy time for the Buy To Let market. New legislation introduced between July 2015 and July 2016 expected to temper the soaring rental costs for tenants. In June, the United Kingdom voted to leave the European Union. This move expected to create as much instability in BTL as it did elsewhere.
Rents Rise Almost Everywhere
Despite the problems elsewhere, including the revised economic situation for the UK for 2017, the ONS reported rents increased in the year up to July 2016. Rents increased on average by 2.4%. This was not uniform across the UK though, some areas had lower and others higher. Analyses of rents from after the referendum vote shows that this demand has yet to slow. On the contrary, in London, demand has increased and this may be a direct result of the referendum vote.
However, it’s important to remember that the vote was just a month old at this point. The aftereffects may take a while to develop and further instability may take place once Theresa May triggers Article 50 to leave the European Union.
Fall of the British Pound
London has seen increased demand for property from abroad. This is likely to be the result of the drop in the pound’s value since June. Demand for rental property in all areas in London has not abated. In particular, The City, Canary Wharf and East London has seen demand rise across the board. This could also be a mad rush for property from investment banking, desperate to get a foothold in the UK before triggering Article 50. The free movement of people is one of the discussion points.
The Student Rental Situation
The trend of the last 20 years has seen student rents increase by a massive 56.5%. In contrast, rental increase in the general population is 24%. Student accommodation used to be cheap and cheerful, often poor quality. Yet today, especially in the capital, students are more demanding than they have ever been. With spiralling costs and a competitive market, most students will hang on for something better. They expect property to be more than merely “suitable”, expecting innovation and investment from their landlords. This could be even more important as the instability continues throughout the period of negotiating Article 50.
The Worst May Yet Be To Come
It’s important to remember that no formal move has been made to leave the European Union. The instability we have seen since the vote, the resignation of David Cameron, the leadership challenge to Labour, could all have contributed to that instability. There is no telling what might happen when the country actually leaves the EU. This also depends on the nature of the deal the EU offers. Landlords are likely to be braced for a tough time. With planned housing investment on the increase, profit margins could fall due to multiple factors.