How Brexit will affect UK Landlords

How Brexit will affect UK Landlords
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Despite the temporary hope that Boris’s confident negotiating style brought to the Brexit campaign, optimism for a Euro deal is wavering as the deadline approaches. After all, it’s much harder to make an effective debate speech over Zoom, and with half the EU team in quarantine. While we await the result, here are some key points and predictions for how landlords will be affected in a post-Brexit UK.

The 2020 property market

Few things have emerged triumphant from this tumultuous year, but the property market is one of them. Shoots of confidence from the ‘Boris bounce’ of January and February were still there when agents reopened their doors after lockdown number one, and Rishi’s celebrated stamp duty holiday – as well as a new wave of freedom afforded by home-working – heralded a buoyant movers’ market, with the UK seeing its biggest house price increase for almost 3 years.

The Brexit result will dictate whether we see a property market boom or bust in 2021. Swathes of tax changes and incentive cuts have been making things more difficult for landlords year upon year. Unwelcome changes brought by a no-deal Brexit might be the last straw for many.

Despite all the intelligent prediction in the world, without a crystal ball, we can only speculate on what 2021 will bring. But whether we leave with a deal or not, there are some key positives landlords should all remember when mentally mapping out new year plans for post-Brexit England:

#1. The property market has proven to be remarkably resilient. It was stable throughout the three years of the initial Brexit debates, and its performance surpassed all expectations during COVID-19.

#2. A vaccine decreases the likelihood of further lockdowns and disruptions. It’s highly unlikely landlords will have to deal with locked-in tenants, rent payment holidays, or long waits for court dates for evictions to the same degree they did in 2020.

#3. A revolution in working culture has the UK on the move. Inquiry levels are up across the board, with one property specialist reporting a 23% increase in tenant inquiries from last November’s figures.

How will landlords be affected by Brexit?

Buyer confidence: If we exit without a deal, landlords trying to sell unwanted rental investments may deal with an inhibited market due to loss of confidence. If we leave with a deal, the market may be more likely to remain stable.

Mortgages: If we exit without a deal, and if (there are a lot of ifs) a recession follows, interest rates on buy-to-let mortgages will no doubt be affected. This won’t matter so much for locked-in mortgages, but may mean that professional landlords will find it harder to expand their portfolios.

Rental income: A no-deal Brexit will no doubt have an impact on the economy, at least in the short term. If the job market fails to recover quickly, many landlords may deal with tenants struggling to find jobs and pay rent.

Tenant pools: Those renting to EU citizens who do not get their paperwork returned in time may see themselves losing tenants. Incoming EU workers now have bigger fees to pay, and must be earning £25,600 per year or more, which may mean a reduction in immigration, resulting in lower demand for rental property.

How should I prepare for Brexit as a landlord?

Right to rent checks: Perhaps the most notable change in the letting process for landlords will be checking a tenant’s right to rent in the UK. The government has not yet confirmed exactly how this will change, as it will depend on whether we achieve a deal or not. From January 1st 2021, landlords will need to adapt their checks accordingly to new guidance.

Mortgage rates: As we mentioned above, interest rates affected by economic uncertainty will be a big one in terms of your monthly expenditure. If your mortgage is up for renewal, it might be worth speaking to your lender now to see if you can lock in a cheap deal.

How will commercial landlords be affected?

Commercial landlords may face a far rockier road. The mass-exodus from offices and the decimation of high-street retail means unstable tenants, which in turn will mean lease renegotiations, shorter terms, and a high risk of void periods. Retail landlords are already adapting and restructuring to new kinds of terms, such as the turnover-based lease agreements agreed to by Ted Baker, and outlined in New Look’s most recent CVA, where 68 stores will pay zero rent, and the remaining 402 will convert to turnover-based leases.

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