As 2016 reached its halfway point, one of the biggest debates to rock the UK finally came to a head, as 52 per cent of Brits voted for the nation to leave the EU, plunging the markets into uncharted territory.
Despite predictions of a post-Brexit crash, the market remained largely stable, partly to do with calming measures instigated by the Bank of England. However, ‘uncertainty,’ the buzzword of the months following the leave vote, prevailed, leaving landlords with many unanswered questions.
Following Theresa May’s announcement that the UK plans to trigger Article 50 in March 2017, the National Landlords Association (NLA) conducted a survey of current landlord sentiment, and found a largely positive outlook. 39 per cent of UK landlords believed that the Leave vote would not have a negative impact on the sector, with 5 per cent even expecting business to improve.
There was evident regional variation in the findings, especially with the prime London market expected to be bolstered by the vote due to an exchange rate favourable to overseas investors. On a smaller scale, many areas of London have been in the spotlight during 2016 after being marked out as up-and-coming hotspots. Back in August, the London Bridge area was highlighted as one to watch following the development of its new passenger concourse, whilst Bexley has again topped the National Hotspots Index for the seventh time, with its status as London’s most affordable borough leading to 70 per cent of the properties in the area put on the market being sold in the months prior to the Index.
However, Brexit was not the only controversy to cause confusion, with the new Right to Rent regulations continuing to baffled landlords. The scheme, which requires landlords to check their tenants immigration status, was rolled out across the country following a pilot in the midlands, yet many landlords and agents were unsure of their responsibilities. Subsequently though, in March 2016, changes to the immigration Bill were brought in to protect landlords deemed to be taking ‘reasonable steps’ to check their tenants right to own UK property. Landlords had previously faced immediate criminal sanctions should their failure to ensure their tenants had the right to rent property in the United Kingdom be detected.
This uncertainty regarding landlord responsibilities was also mirrored in the run up to the introduction of Rent Smart Wales, with a campaign launched to ensure landlords were aware of the introduction of the legislation in November.
Despite the inevitable shakeup in the sector from this plethora of regulation and change, stability prevailed, with government figures revealing that the average private rental sector tenancy has now reached 4 years, up a staggering 300 per cent from 2014’s figure. Coupled with growing tenant satisfaction, this shows a shift in expectation from the insistence of previous generations upon owning property, and instead a growing contentment with the flexibility associated with by to let.
Overall, 2016 can be described as a year of two halves for investors. In the months until July, buy to let returns exceeded the FTSE 100, with landlords in England and Wales making gains of 9.6 per cent in comparison to a fall of 3.9 per cent in the stock market. However, throughout the year the average residential rent in the UK increased slightly, with growth of 1.12 per cent, and this is set to see rapid growth in 2017.
Factors such as tighter affordability controls from lenders, as well as a squeeze in demand as the impact of the removal of mortgage tax relief becomes clearer, are likely to push rent prices higher than ever during 2017, finally giving landlords something to look forward to.