Rental briefing: too early to predict post-Brexit property performance

Figures would suggest the property market is holding in the wake of the Brexit vote. Picture: AFP/Getty Images
Figures would suggest the property market is holding in the wake of the Brexit vote. Picture: AFP/Getty Images
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There have been a few scare stories post Brexit, with a significant chunk of the weaker analysis coming from buying agents trying to talk the property market down.

While Nationwide has reported that house price growth slowed in the run-up to the Brexit vote, more recently it said June prices were up 1.3 per cent from May which seems to suggest the market is proving quite resilient.

We have even heard rumours of opportunistic overseas investors looking at purchasing property in the UK, scenting bargains from the uncertainty and exchange rate.

So far, here at Purplebricks, we haven’t seen a slow-down in activity.

In fact, post Brexit we have had three of our best trading days ever. Neither have we seen any significant increase in offer withdrawals or a return to gazundering.

The truth is that it may well be too soon to say how residential property is performing post-Brexit.

But the fundamentals haven’t changed.

Mortgage availability is good and Scotland, like much of the rest of the UK, still needs more high-quality affordable accommodation – although government policy in this area is having some unintended and unhelpful consequences for the private rented sector.

The measures permitting local authorities to implement rent caps in areas where there are “excessive” rent increases, included in the Private Tenancies Bill, are a case in point.

Purplebricks is all about fair fees and value for customers, however this policy may well hurt the very people it seeks to help.

It could push up sales volumes as landlords, unable to raise rents to meet the market’s demand, begin to exit the market.

At the very least, rent control will result in lower investment, and lead, ultimately, to fewer new homes being built.

In 2007-2008, 22,000 new dwellings were built by the private sector.

The latest figures show this is now closer to 12,000.

We’ve already seen the unintended consequences of the government’s actions coming home to roost with the Land and Buildings Transaction Tax (LBTT) surcharge. This requires landlords to pay an additional supplement of 3 per cent of the purchase price for buy-to-let properties.

According to the Scottish Fiscal Commission, the supplement on LBTT will affect between 8,500 and 12,500 transactions each year, and could raise between £19 million and £27m for the government but tenants are finding it even harder to get the accommodation they want at an affordable price.

Post LBTT supplement rent increases mean the average rent in the Lothian region now stands at approximately £665 per month compared to £630 per month when Purplebricks completed our national roll-out and launched in Scotland last November. Rents are going up for two reasons.

The LBTT supplement has discouraged landlords who might have invested in the sector from buying property or expanding their portfolios. This means supply is gradually slipping further away from demand.

The primary tenure for households in Scotland is still owner occupation, however 14 per cent of households now live in the private rented sector – a sector that has doubled in Scotland over the last ten years.

Secondly, landlords who have bought properties recently are trying to recoup their losses and, where they can, they are putting up rents. Since there’s a little less competition, that’s easier to do.

It’s not all doom and gloom for the market though.

Given that homeowners are set to snap up the cheapest ever ten-year home loans as the mortgage price war continues to escalate, the drop in competition from landlords means there are more opportunities for first-time buyers to enter the market.

So while Brexit has proved a shock to the market and the long-term effects of last month’s vote on the residential property market are as yet unknown, there are some natural stabilisers and grounds for optimism.

At Purplebricks the message is keep calm and push on.

Richard Jacques is the lettings director at Purplebricks