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Insight & Opinion

Post-Brexit effect should continue to boost the rental market

Author: Luke

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The outcome of the referendum in June to decide whether or not the UK should remain as a member state of the European Union has turned out not to be the disaster for the property market that it was predicted to be before Brits went to the polls.

It was thought that in the aftermath of the decision to exit the EU, house prices would plummet, sales would grind to a halt and landlords would see fewer tenants, driving down the value of their investment. But in fact, new research has suggested that the actual Brexit effect will see quite the opposite for the latter group.

According to forecasts released by Savills this week, between now and the end of the year 2021, rental properties are set to be the stars of the market, with price increases in the private rented sector set to be far faster than house prices in the same period.

This is being brought about, according to the findings from the property consultancy, by a “post-referendum economic uncertainty” and weaker consumer sentiment. It means that fewer people will be choosing to buy homes over the next few years, instead opting to rent.

This is good news for investors in the booming buy-to-let market, who will see prices rise with demand, helping to deliver them a far better return on investment than they might have expected, especially immediately after the referendum.

Savills said that the increase in rental prices will be kicked off next year with a 2.5 per cent rise, followed by a four per cent climb in 2018 and a rise of five per cent in 2019. By the end of 2021, it said that there will have been climbs of 19 per cent on average nationwide in the price of rent when compared to the end of 2016.

This is compared to the much more subdued sales market, where there will be five-year total rise of just around 13 per cent, with a growing number of potential buyers choosing to rent homes instead, pushing demand in this area of the property sector ever higher.

The forecast trend has also been backed by JLL, which released a report this week which suggests it will expect to see the price of rental properties rising by some 18 per cent over the course of the next five years thanks to demand, meaning that it’s highly likely that investors in buy-to-let will be welcoming strong performance and returns for some time to come.

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