Rent bills are likely to fall if Britain exits the EU and property will become more affordable to first-time buyers, according to the bodies that represent the UK’s estate agents and landlords.
The National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (Arla) said that Brexit would cut levels of immigration and depress future price rises, leaving the average UK house worth £2,300 less in 2018, and £7,500 less in London.
In forecasts likely to be seized upon by leave campaigners, the group estimates that the population of the UK will be 1 million less than projected by 2026 if Brexit takes place, cutting the demand for buy-to-let properties.
“Lower immigration would mean less people looking for accommodation which would lessen the demand and, potentially, the upward pressures on housing prices, especially in those regions popular with EU migrants,” said the report.
“Lower immigration would also impact rental prices. UK residents born in other EU countries are far more likely to be private renters. Therefore if fewer EU nationals move to the UK in the long term there may be a noticeable impact on demand levels.”
It said an out vote “could provide first-time buyers with breathing space as demand for housing eases off”. But it warned that Brexit would also hit the construction industry hard, jeopardising plans to build more houses.
Mark Hayward, the managing director of the NAEA, said: “An out vote could mean that in 10 years’ time we’d find ourselves with a severe skills shortage of construction workers. So even if we then had planning permission, investment and materials to build more housing, we simply wouldn’t have the resource to put the bricks and mortar together. It has the potential to have a very damaging effect on the future housing market.”
One in 20 workers in Britain’s construction industry were born in non-UK EU countries, said the NAEA, and they are vital in filling the skills gap.
The NAEA and Arla, which together have about 15,000 members, have refused to endorse either the remain or leave camps, saying that their members are split on the issue.
The forecast that Brexit will result in lower house prices follows similar warnings by the International Monetary Fund. Last week, Christine Lagarde, the IMF’s managing director, warned that quitting the EU would result in “sharp falls” in house prices and on stock markets.
The London property market would be particularly affected by Brexit, according to the NAEA/Arla report. It said that in 2013, 17% of overseas buyers in London’s prime property market were EU nationals.
“The impact of the market uncertainty is especially pronounced in the London market as property in the capital has often been considered a safe haven investment ... and London may lose that status if it enters an extensive period of figuring out its economic and political standing post-EU membership,” the report said.
But David Cox, the head of Arla, said tenants should not get too excited about rent falls, as buy-to-let landlords may quit the market en masse following a vote in favour of Brexit.
“The fact that rent costs would face downward pressure is both a blessing and a curse. While renters should face fair and reasonable prices, landlords need to be able to at least break even on any outgoings they have, such as a mortgage. If demand eases to such an extent that landlords cannot recuperate costs, we’ll likely see a mass exit from the market, which would then just have the opposite effect on demand as supply falls – and we’d be back to square one.”
Commercial property in London has already been hit by uncertainty over a Brexit vote. Over the past week M&G, Standard Life and Henderson have all changed the pricing basis of their commercial property funds, which has the effect of cutting values by 5-6%, following large outflows.
Guy Stephens, of wealth managers Rowan Dartington Signature, said: “Investors are withdrawing from the sector, not in anticipation of imminent recession, but more as trepidation sets in ahead of [a potential] Brexit.
“Who would want to commit to a longer-term construction project when the economic outlook could change dramatically if we choose to leave the EU? In addition, there may be voids in prime office locations in London from businesses engaged in financial services or, at the very least, investors will become cautious of tenant demand should we choose to exit.”