What do the early days of Brexit mean for the letting industry?

After a few years of uncertainties surrounding Brexit, some might say that there is still no clear plan to what could happen now we have left the EU. At present, the UK is in a transition period, and at the moment, the property and lettings market appears to be relatively subdued.

However, that’s not to say landlords and agents are putting this on the back burner until the end of the transition period.

Speaking with Estate Agent Today, Mike Scott, chief property analyst at Yopa, said: “This year is likely to be another difficult year politically, as Brexit continues to dominate the agenda, and this is bound to affect the housing market.”

What’s happening in the private rented sector?

In the latter part of 2019, the UK saw the average cost of a rented home increase by 2.1% year-on-year, which in comparison was almost double the previous year. According to Hamptons International monthly lettings index, this is due to a shortage of rental properties paired with stronger demand from tenants in the market. 

There has also been a drop in landlords buying new properties to rent out. This is said to be due to the changes in tax and regulation over the past 12 months. Hamptons International reported that there were 7.8% fewer properties available to rent in 2019 and more landlords were selling their portfolio, leaving fewer homes to rent. This was more prevalent in the south of England, where there were 11.7% fewer homes to rent.

At the end of 2019, the Queen’s speech also laid out plans to scrap Section 21 of the Housing Act and reform the grounds for possession. However, this is likely to put off landlords in the coming years, which could cause a further decline in the availability of rented properties.

After the announcement David Cox, chief executive at ARLA Propertymark said: “In the absence of any meaningful plan to boost the level of social housing in this country, the announcement confirming the abolition of Section 21 in the Queen’s speech is another attack against the landlords who actually house the nation. If Section 21 is scrapped, Section 8 must be reformed, and a new specialist housing tribunal created. Without this, supply will almost certainly fall, which will have the consequential effect of raising rents and will further discourage new landlords from investing in the sector. ARLA Propertymark will be engaging with the Government to ensure they fully understand the consequences of any changes, and we will be scrutinising the legislation, to ensure landlords have the ability to regain their properties if needed.”

Will rental property costs rise?

As we enter the transition period, it would seem very little has changed in the scepticism that landlords have about the future of the market. If regulatory amendments are to go ahead, landlords and agents stress that the Government needs to make the market more attractive to invest in.

Knight Frank has forecasted that over the next five years rents will rise on average of 10% in the UK and 15% in London, which will raise the general cost of living for individuals and families.

Anton Frost, partner, Carter Jonas, commented: “With less stock comes increased competition and higher rents, and without legislative changes that can stabilise the landlord market, the tenant struggle for the right home at an affordable price may go unchanged.”

The next steps for the market

It is evident the Government must do more to increase the supply of housing to meet demand. However, there is also the call to make the market more attractive to landlords to enable to supply of homes. Landlords are also calling for reform in the tax system and regulatory changes over the next few years to ensure the rental market is still a viable place to invest.

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