Just in case you were unaware, it is now less than six months until the United Kingdom formally leaves the European Union.
Therefore, this seems an appropriate moment to take stock of the implications for the residential property market in Scotland. Or, perhaps more specifically, the residential rental market because the vast majority of citizens of other EU countries living and working here are tenants rather than owner-occupiers.
Since 2004, when the UK granted Polish citizens the right to live and work in the UK under “freedom of movement”, a small number have become home-owners. However, the majority, plus those who have subsequently come from Romania and Bulgaria, have stayed in the rental market. This is due to the difficulty of raising the deposits currently required by mortgage lenders but also the lack of a sufficient credit history in the UK. A major factor, of course, is that many are undecided whether their longer-term future lies here or in their home countries.
Which brings me to the point of what effect our departure from the EU six months from now will have on these continental tenants and how their future status in this country will affect the rental market. Make no mistake, their presence has been significant.
There are reckoned to be a quarter of a million people from other EU countries resident in Scotland. This has meant an additional demand for rented housing that simply did not exist 15 years ago and has undoubtedly contributed to an upward push on rental levels.
My presumption is that, even in a “hard Brexit” (leaving the EU without a deal), those citizens from EU counties currently working here would be offered permanent residency rights for the simple reason that common decency and the needs of our economy demand it. However, should our departure end in “hard Brexit-plus”, with bad feeling on both sides leading to restrictions on trade and people’s residency rights, then, yes, the inevitable consequence will be a slump in demand and diminution in rents. This will not be across the board but restricted to lower-rent locations across central Scotland, where most eastern European immigrants are located. The upside, of course, is that the consequent lower demand should mean cheaper rents (and prices, and therefore be welcomed by first-time buyers) among the native population – admittedly an Achilles’ heel within the Brexit debate for dedicated “Remainers” like yours truly!
In the Brexit debate, it is often forgotten that in terms of immigration, residential rentals is a two-tier market. Not all EU citizens living here are from the relatively new member states; those from the likes of Germany, the Netherlands and France are more likely to be highly skilled workers who came to Scotland to fill a specific job rather than just exercising their “automatic right” to live here. They tend to have enough money to live in middle- to upper-priced neighbourhoods.
Another substantial sector of the market relates to people from the other continents of the world. They have to meet specific skills and salary requirements before being permitted entry, so those who qualify are relatively high-earners. Whatever the outcome, Brexit will not affect their status. Added to this, Edinburgh (and, to some extent, Glasgow) attracts a substantial number of non-EU students whose wealthy parents pay top-end rentals so their offspring can study in comfort.
And let’s not forget our friends in the south. Given the stress and expense of living and working in London, Edinburgh is increasingly attracting relocators from the south of England, even if they have no family connections here. Invariably, they will choose rental accommodation as a means of testing the local market before choosing a permanent home. Whatever happens with Brexit, this source of residential business, at least, is unlikely to dry up.
- David Alexander, MD of DJ Alexander.