What would a no-deal Brexit mean for UK landlords?


Do you remember when a no-deal Brexit was “a last resort”? Or when we were told that there’s “no plan for no deal, because we are going to get a great deal.”
But that was then, and this is now. At the time of writing, a no-deal Brexit is looking increasingly likely, as the prime minister Boris Johnson prepares the country to leave the EU without a deal. But who knows what might happen?

Ongoing uncertainty surrounding Brexit

Nothing about Brexit is certain. As a result, landlords and property investors – along with the rest of the country – are keeping a watchful eye on political developments. Many property owners are playing a waiting game until we get to the latest ‘official’ Brexit deadline of 31st October 2019.
According to a survey by the National Landlords Association (NLA), more than a third (35%) of UK landlords are worried about Brexit and believe that leaving the European Union will have a negative impact on their ability to attract tenants in the future. That same survey also found that 39% believe Brexit will have no significant impact on their business.
However, that research was carried out before a no-deal Brexit started looking like the most probable outcome.

Recent trends in the rental property market

Property owners are looking to recent trends to try to understand how the market will fare over the coming months.
It is encouraging to see the UK property market has been resilient since the EU referendum. The rate of growth has slowed in some regions, but performance has been positive overall. In April, house prices rose at the fastest annual rate in more than two years, increasingly by 5% in the three months to April this year. 
However, rental yields for landlords have suffered. According to a report by research firm BVA BDRC, 26% of landlords were planning to sell at least one property from their portfolio in the next 12 months.

What does a no-deal Brexit mean?

The UK exiting the EU without a deal would mean that trade between the UK and EU would be governed by World Trade Association rules rather than the current legislation. That much is clear. The problem is that no one knows what those rules would mean for the UK’s markets in a practical sense.
So, speculatively speaking, what should UK landlords expect from a no-deal Brexit?
Landlords already face a significant number of regulatory changes but are now facing the impact a no-deal Brexit would have on the number of private tenants who are EU nationals.
Landlord associations have been vocal about unclear tenancy rules for EU nationals. The Residential Landlords Association (RLA) has repeatedly expressed concern about the lack of clarity for landlords surrounding Brexit, revealing that 66% of EU nationals live in private rented housing in the UK. It has advised landlords not to sign new contracts with EU tenants.
Under the government’s right to rent policy, landlords could face criminal charges if they have ‘reasonable cause to believe’ they are renting their property to someone who doesn’t have the right to rent in the UK. In the event of a no-deal Brexit, argues the RLA, this could result in landlords acting as unofficial border agents.

Opportunities for landlords post-Brexit

Insuring a rental property gives landlords a sense of certainty, but there is not a quick-fix for Brexit certainty.
The uncertainty of Brexit is a frightening prospect, but savvy landlords are watching out for what opportunities it may bring.
Many landlords have chosen to take a regional approach to property investment. London house prices have undoubtedly suffered as a result of Brexit uncertainty, but other areas of the UK have seen high levels of investment since the EU referendum.
Cities such as Cardiff, Newcastle and Liverpool have proved appealing for property investors, driving up prices faster than the national average. These regional hotspots are ones that landlords are watching regardless of the Brexit outcome.
One problem with housing in the UK is that supply simply does not meet demand. The government has set a target of building 300,000 new homes a year by 2022, which could help make homes more affordable. Landlords will be watching with interest to see if this creates any buy-to-let investment opportunities moving forward.
Landlords who own property in the EU could also reap the rewards of a no-deal Brexit. They will see the sterling value of their properties increase – along with the sterling value of any rent received – as the value of the pound drops.

Advice for landlords in the lead-up to Brexit

Even with Brexit looming large on the horizon, the UK is expected to continue attracting property investors. History tells us that the housing market will always bounce back (see the 2008 financial crisis and the 2016 referendum) and many industry experts are confident this trend will continue.
As property owners wait to see the outcome of the current political situation, many recognise that if they are making a long-term investment and fully understand the local market and demand the potential for good returns on property is always a reality.
Brexit aside, property investors who do their research, looking for areas with high levels of planned regeneration or with major universities, will see the best returns. Knowing where to buy is more important than knowing when to buy right now.
The best advice for landlords is not to panic, not to make any snap decisions, and to ensure that you don’t overlook the basics such as landlord insurance. Keep abreast of changes in legislation and remember that property is generally a good investment.
A survey by Market Financial Solutions revealed that 53% of UK investors would rather invest in ‘traditional’ assets such as property than newer ones like cryptocurrencies. While 63% view property as a “safe and secure asset”.
Put another way – landlords have it much easier than investors in other sectors.
Insurance Choice is a specialist in finding landlord insurance to meet every property owner’s needs. Get in touch with the team today to find out how we can help you insure your investment.