It’s hard to believe that Brexit is still ongoing – more than four years after the EU referendum of 2016.
And while there is light at the end of the tunnel, naturally London landlords need answers to a number of important questions on how the UK’s exit from the EU could affect them.
Here, we’ll outline where we are in the Brexit process and look at how the final departure from the EU could affect you as a landlord.
Brexit: Where we are right now
Despite officially leaving the EU on January 31, 2020, an 11-month transition period was put in place for the UK government to thrash out a trade deal with Brussels.
That transition period comes to an end on December 31, 2020 – less than a month away.
And with no trade deal yet to be agreed at the time of writing, the clock is ticking.
House prices after Brexit
The Bank of England predicted two years ago that a ‘no deal’ Brexit could see house prices fall by as much as 35% in the following three years.
That ‘doomsday’ scenario looks extremely unlikely given the average price of a home in the UK has risen from £217,888 in September 2016 to £239,196 in August 2020 – 9.7% growth.
In London, meanwhile, property prices have grown by 3.5% in the year to November 2020.
While any post-Brexit correction in prices could be seen as good news for landlords looking to expand their portfolios, it could also open the door for more renters to buy their own home – especially first-time buyers, who will still have access to the Help to Buy scheme and the stamp duty holiday, which runs until March 31, 2021.
Brexit and buy-to-let mortgages
Early suggestions that the Bank of England could raise interest rates after Brexit were curtailed by the coronavirus pandemic, which sparked two successive rate cuts in March 2020.
The current rate of 0.1% is the lowest in history and with the economic effect of the pandemic still being felt as we move towards 2021, a rise in interest rates looks extremely unlikely.
Indeed, some commentators have suggested rates could move into negative territory for the first time next year.
That means buy-to-let mortgages remain largely affordable. According to Moneyfacts, the average two-year fixed rate buy-to-let mortgage rate is now 2.52% (60% LTV).
Rent after Brexit
Any potential instability in the property sales market following Brexit, and with pandemic ongoing, should mean the private rented sector remains buoyant and demand from tenants remains high.
According to the Office for National Statistics (ONS), rental values across the UK rose by 1.4% in the year to October – a healthy rise despite the general uncertainty caused by both Brexit and Covid-19.
Right to Rent rules and Brexit
One of the biggest unknowns for landlords post-Brexit surrounds Right to Rent checks.
Currently, landlords, or their managing agents, are responsible for checking the immigration status of tenants to ensure they have the right to rent privately in the UK.
According to government guidance, landlords and agents should continue to implement Right to Rent checks until June 30, 2021.
That means passports and EU national identity cards remain acceptable proof of a tenant’s right to rent up until that date.
From January 1, 2021, a new points-based immigration system will come into effect in the UK – but the changes to the Right to Rent process have been delayed until the spring of 2021 due to the coronavirus pandemic, so landlords are currently no nearer knowing how the changes to immigration will affect them.
How to ease the burden of Brexit change
Right to Rent is one of the most complex processes landlords need to stay on top of and the changes that are certainly coming to the immigration system in 2021 remain largely unknown.
Our tenancy management services can help ensure you remain compliant when it comes to Right to Rent checks and other changes to legislation once the Brexit transition period comes to an end.
Speak to your local Ellis & Co branch to find out how our management services can help give you total peace of mind.
As the coronavirus pandemic continues to play out, take a look at our view on how the ongoing restrictions are affecting the London property market.