Earlier this year, the UK voted to leave the European Union, and although Article 50 – the mechanism that starts the process of leaving the EU – has yet to be triggered, there has already been a big impact on the economy.
If you're a landlord, or are planning on becoming one, here's some key points to consider about the state of the buy-to-let housing market following June 2016.
Increase in foreign investment
Following the results of the referendum in June, the drop in the pound's value has meant that foreign investors have been keen to purchase more property in Britain. The number of enquiries by overseas house-hunters has increased by 50% since the vote, as the pound's fall against the dollar has meant a 30-40% discount for American buyers in real terms. This won't affect most buy-to-let landlords, but if you're planning to offload some of your portfolio, now could be a good time to consider seeking foreign buyers.
Resilient housing market
The housing market has remained buoyant since the EU referendum, proving fears of an immediate housing crash to be unfounded. There was a slight calming in the market during July, but this could equally be attributed to the additional 3% stamp duty added to second properties since April. Overall housing prices have remained steady, with a drop in the average house price of just £2,702. In addition, rent prices in prime central London locations have fallen for the second successive quarter.
New-builds back on track
Building firms took a big hit in the immediate aftermath of the June vote, with share prices dropping by around 40%. This could have been a knee-jerk reaction, as share prices are on the rise again and have been steadily recovering over the summer. Chancellor of the Exchequer Philip Hammond has indicated that he will introduce financial measures to boost construction, so his first Autumn Statement, on 23 November, is a key date for the building industry.
Legislative changes
The EU referendum hasn't been the biggest factor affecting buy-to-let landlords this year. Stamp duty hikes, a reduction in tax relief and the "right to rent" policy (meaning landlord's need to check the immigration status of all tenants) have all discouraged investment in the property market. Since June there has been talk of banks curbing buy-to-let lending, and there may be legislative changes to how buy-to-let property sales are taxed. These developments are worth keeping an eye on.
Future uncertainty
So far most of the effects of the Brexit votes have been caused by political uncertainty and the value of the pound. However, once Article 50 is triggered in 2017 and the negotiations for the UK to leave the EU begin in earnest, that could change.
It's also important to pay close attention to announcements from the Government in the coming months, including the Chancellor's Autumn Statement, which is likely to have a greater impact on the property market. Already renting out your buy to let property, or planning to soon? With AXA landlord insurance, we make protecting property simple.
