Brexit – are we any further forward?
5 Mar 2019 03:39 PM
As the March 29 deadline approaches, we ask what the impact of Brexit will be on the private rented sector? In an article first published in RLA magazine Residential Property Investor, policy manager John Stewart looks at what we do – and don’t – know so far.
Though it may not seem like it for landlords, who have faced swathes of new legislation, Brexit has dominated the political landscape since the result of the 2016 referendum.
With Britain due the leave the European Union on 29th March we should be approaching the end game, but recent events have sometimes felt like the start, not the end, of the process, and more like a West End farce than democracy in action.
Parliament reached deadlock in December, when the Prime Minister first ducked out of a vote on her negotiated deal, with supporters of both hard Brexit and no Brexit lining up to attack the proposal.
Instead she faced a vote of confidence triggered by MPs in her own party, which she saw off with the support of around two thirds of her colleagues.
The Labour leader then fluffed his lines, failing to force a no-confidence vote in the government. And suddenly, with nothing resolved, Parliament went on holiday for three weeks!
Parliament returned in the New Year to do all again.
Back to Brussels
Mrs May was sent back to Brussels to renegotiate the backstop she had created, out of the the very deal that she had previously said was the only one on the table.
The EU repeated its view that the deal would not be reopened and stuck to its guns.
Labour eventually forced – and lost – the long-promised no-confidence vote and any meaningful vote on Brexit was pushed back again.
February, saw round three, following fruitless cross party talks, and with no movement from any side, another promised meaningful vote was called off. Eventually, the the Labour party split, losing 9 MPs, then three anti-Brexit Conservatives joined them in the not-a-party Independent Group.
Parliament rejected ‘No Deal’ again, Labour edged towards backing another referendum, and the Brexiteers edged closer to the PM’s deal, rather than risk no Brexit at all. And some delay to the 29th March deadline now looks inevitable. Are you keeping up?!
Where does this all leave the property market and private renting?
The one thing that has characterised the Brexit debate from the outset is that most peoples’ views are set, depending on whether they voted to remain or leave, and have appear to have become more entrenched over time.
So, if you voted to stay in the EU, you believe Brexit will be an unmitigated disaster, crashing the economy, destroying jobs and leaving Britain in ruins.
If you voted to leave then this is all scaremongering nonsense, that after a brief period of disruption Britain will get on trading with the rest of the world, the economy will boom and Europe will be begging for the sort of bespoke free trade deal it had hitherto refused.
To be fair, evidence so far leans towards the former…
What do the figures say?
But to start our crystal ball gazing, it might be helpful to look at some of the statistics involved.
80% of all new migrants to the UK live in the private rented sector.
There are 2.28 million EU nationals working in the UK with others studying or living here as family members.
Over half of EU born migrants live in the PRS – that’s 11% of the total PRS market.
The status of EU nationals post-Brexit, and their response, is a big issue, especially in cities and in areas where industry is dependent on migrant workers.
The RLA has been pressing the government for clarity, especially around the ‘right to rent’ checking requirements of EU nationals, post-Brexit.
Landlords are already uncertain when it comes to checking documents and a new set of rules and documentation would be unwelcome.
Are we likely to see a rush of EU nationals returning home?
Statistics suggest that this may well be the case.
The rate of migration from the EU to the UK has dropped markedly since the referendum – by over 100,000 – and for late-entry eastern European EU countries, there are more people returning home than arriving in the UK.
Will this mean the pool of potential PRS tenants shrinks after we leave?
A lot will depend on the performance of the economy.
Since 2016 UK economic growth has slowed, relative to the other G& economies.
Household borrowing – thought to be a key driver of the last crash – is rising.
House prices are up – but that may be a result of supply drying up – transactions have fallen considerably. Rent increases are slowing.
The stock market and the value of the pound have fallen, but employment levels and exports have risen.
How much of this can be attributed to the Brexit vote is debatable.
Government property taxation is likely to be the bigger culprit when it comes to the slowdown in house sales.
If the economic outlook looks bleak, then we will see the slowdown in EU migration continue or reverse.
The falling pound also means earnings in the UK are worth less back home, making the UK a less attractive destination for migrant workers.
And what about the impact of Brits abroad?
Of the 1.25 million UK citizens living in the EU, here are a quarter of a million pensioners.
When we leave the EU their pensions will be frozen at current levels, on top of a weak pound already impacting their spending power.
Will we see a significant number return home? What impact will that have on the housing market?
Anecdotally, there has already been a spike in interest from this group in properties in resort towns and villages on the south coast, the south west and west Wales.
Will these returners be buyers or renters?
Certain sectors of industry will be hit harder than others, as will certain regions, as pre-existing skills shortages become acute.
The caring services, the NHS, service industry, construction and agriculture could struggle to attract recruits.
The bottom line on Brexit is that nobody really knows. Its impact depends on where you are and who you ask.
However, uncertainty is rarely helpful and by now, we had expected much of the uncertainty of Brexit to have been addressed.
With just weeks until the UK exits the EU, we are no closer to knowing which of the three viable options – remain (with or without another referendum), leaving with a deal, or a no deal Brexit – will win the day.
It’s clear that, in the short to medium term, domestic policies will have a much bigger impact on private renting.
But just like Brexit, while we may crave a period of stability and certainty, the domestic policy climate for private landlords continues to be one of change and challenge.