With more people renting than ever before, the impact of Brexit on the rental market has potential to be massive. From market demand and prices to immigration numbers and overseas investment, here’s our review of Brexit’s effect on the UK rental market so far...
Slowdown in immigration and decreasing rent prices
Brexit has already had an effect on the number of foreign nationals living in the UK, as well as the numbers applying for university places and most famously nursing placements. In Reposit’s UK Lettings Industry 2017 Whitepaper, Cullen Property’s MD Malcolm Warrack offers insight into the impact in Edinburgh: “I think Brexit has had an affect on the number of Europeans seeking accommodation in the lettings market. We have seen slightly less applying (for rental accommodation) already... and less Europeans applying to UK universities.”
As of 2017, rental prices in the UK have fallen for the first time in six years. Information provided by Countrywide stated that the average monthly rent across the UK was £5 lower in February 2017 than it was a year before; the first decrease since 2011. Most surprisingly, the biggest fall has occurred in London. Whereas the monthly average across the UK fell by £5 to £921/month, in London it fell by £63, to £1,246/month.
Rents have fallen across the southeast by an average of 2.6%, but in other parts of the UK, rent values have risen. In Wales, the average went up by 5.3%, and in the east it was up 3%.
In June, Homelet published figures that show this falling trend has continued. What’s more, we’re seeing the extremely rare phenomenon of rent prices falling in The South, but rising in The North. For example, in the 12 months leading up to June 2017, the average in the North West rose by 2.0%, whereas in London and the South East, it fell by 2.6% and 0.2% respectively.
The UK, and London in particular, has seen a boom in foreign investment since the Brexit vote. A large proportion of new units bought by overseas investors due to the immediate weakening of the pound after the referendum.
Foreign investment really could be good news for the UK’s renters, at least in terms of availability of high-quality property to rent. In the past three years, foreign buyers bought 3,600 of London’s 28,000 newly built homes. A third of new homes in the prime central London boroughs of Westminster, Kensington and Chelsea and The City were also sold to buyers overseas.
There is also a rising trend in mixed-use developments that offer rental accommodation alongside bars, restaurants and retail units. As of January 2017, according to a government report, the number of residential developments currently ongoing in London was 177. Of these, 46 had overseas backers.
While London certainly sees the bulk of foreign investment into the residential sector at the moment, that could very well change as the property market regains strength and prices start to rise again. At that point, many investors will see greater opportunity to healthy returns in more and more regional parts of the UK. Starting with major cities like Manchester and Birmingham and then spreading further afield, foreign investment has the potential to take great effect on much of the nation’s rental market.
Geography also plays a part in the matter of immigration. The areas of the UK where the economy relies most on the work of foreign nationals, be it coders in London or agricultural workers in Lincolnshire, have rental markets that are vulnerable to post-Brexit disruption. That’s where we are likely to see the biggest changes if migrant numbers fall. But those parts of the country that are already home to a very low number of foreign nationals will see less change.
So far, it is London’s rental market that has been most affected by Brexit, and there is a good chance it will soon spread to other major hubs. But for those areas where the impact of the EU is low, the outcome of Brexit has so far had a minimal effect in the rental markets.