The uncertainty surrounding Brexit might play in investors’ favour. Since the EU referendum in June 2016, property prices have fallen in many areas of the country – including by about 15pc to 20pc in prime central London – and interest rates have hit rock bottom.
“While a period of economic turbulence is likely, the nation’s housing needs are no less acute. Bricks and mortar will continue to be a worthwhile long-term investment and Brexit may even offer good opportunities for enterprising investors,” says James Davis, chief executive of Upad online letting agents.
“Cheap mortgage finance is a boon for landlords planning to expand or refinance, and market conditions may mean that bargain buys are on offer,” he says.
A rising number of transactions have fallen through since the referendum vote, with buyers deterred by market uncertainty. At all price points in the market, many singles, couples or families who would otherwise have bought are deferring their plans and renting instead. “Demand for rental property is likely to rise, rents could grow and void periods shrink,” says Mr Davis.
This wait-and-see approach to the Brexit process – compounded by a resistance among wealthier buyers to paying huge amounts in stamp duty – has opened up the rental market to a far wider-ranging landscape of tenants.
At one end are the frustrated would-be first-time buyers. At the other, well-off individuals would prefer to rent for a few years while the market settles, rather than spend six-figure stamp-duty sums on properties that may take years to catch up with their capital appreciation.
Property investment is not a short-term business – and even less so now that additional properties incur a 3pc stamp-duty surcharge. Lucy Morton, head of residential at JLL, says: “It is always best to take a long-term view and consider capital growth over 10 to 15 years or more.”
People buy investment properties for all sorts of reasons – for yields rather than capital appreciation, as an investment for their children or a cushion for their pension pot. Mark Harris, of mortgage broker SPF Private Clients, says: “If these reasons are valid, it may be worth holding on to the property until it becomes clearer what a post-Brexit world looks like.”
Rather than make a panic sale, landlords could use the time to review their property portfolios. “With historically low buy-to-let mortgage rates, ensure you are earning as much as possible from your investments,” Mr Harris says. “Rents in London have softened slightly and values are forecast to be flat in 2017 and 2018, but yields and values further afield may be more attractive.”
Investors should also bear in mind that the phasing-out of tax relief on mortgage repayments from this April may affect how the property is held – whether in a personal name or corporate – and the most effective way to hold it. The tax changes may also affect decisions to take a long-term fixed mortgage, so it is worth consulting a tax specialist.
The latest health check of the rental market by the property auction house Allsop shows that landlords are divided over where to go next. One in six landlords is actively looking to increase the size of their rental portfolio in 2017, but the same number is considering selling.
There is no clear answer in this uncharted territory, but there is little reason for the UK exit from the EU to knock demand for rental property, says Paul Sloan, of Spicerhaart estate agents. “As long as demand outweighs supply and unaffordability continues to shadow the market, the private rental sector will continue to be an increasingly important tenure in the UK,” he says.
The consensus is that it may be best to hold on until the Brexit train reaches the next station. And that could be a very long way from here
Safer buy-to-let investment
Whether you are thinking of investing or are already a landlord, the Telegraph, on behalf of Direct Line, has created useful information on the ever-changing buy-to-let market.
Direct Line landlord insurance is five-star-rated by Defaqto (Defaqto is an independent researcher of financial products) and has more than 250,000 landlord customers. It has been crowned What Mortgage Landlord Insurance Provider of the Year for four consecutive years.
For more information visit directlineforbusiness.co.uk.