Have You Thought About How Brexit Will Affect The Gloucestershire Rental Market?

Posted on: 19 October 2018

Hard Brexit, soft Brexit, no deal, now extra time being discussed, all the news talks about right now is this ‘B’ word. This debate about the economy means most industries are considering the effect this will have, and in the private rental sector we are left wondering how it will impact the property market and more specifically our Gloucestershire buy-to-let investors in the future.

How are landlords reacting?

Generally, in the county we have found that landlords and investors are split into two divisions. Our managers encounter landlords that worry about Brexit and are considering selling up however, there are still many that still view see this as a great investment buying opportunity. Indeed, although we have seen a slowing down of completely new investors coming to the market, we haven’t seen a marked increase in landlords exiting the sector either.

What about tenants?

Nevertheless, following a record summer of move ins, we have seen an increase in tenants and applicants. This is mainly because due to uncertainty in the market, many people are turning to the private rental sector to fulfil their housing needs as less good quality housing stock is entering the market. Due to this ongoing demand for great quality rental properties, it is expected that rental rates will rise in the same way that property prices have, great news for landlords, not so much for tenants.

How does Gloucestershire compare?

Projections suggest that the population in Gloucestershire will reach 657,600 by 2024 and 714,000 by 2039, and supply of housing must grow with this considering projections also state that by 2039 a quarter of all households will be renting. Rising house sale prices and the reluctance of banks and building societies to lend more than 4.5 times an individual’s salary has led to a huge percentage of younger people privately renting (the biggest section of private renters are aged 25 - 34), the average rental cost in Gloucestershire in 2016/17 was £783 a month, which was in line with the regional average (£770) and much lower than the England average (£852) however, there is huge variations across the county with average monthly rents in the Cotswolds standing at £982 (fallen by £40 in the last year) and those in Gloucester at £559.

Further to this, we find there is an increasing number of tenants that are choosing to rent because it gives them flexibility rather than saving for a deposit/lower salary concerns.  Millennials nowadays opt for the ability to utilise flexibility in their homes with the options of providing short notice to change up where they live.  Unlike earlier generations, we are hearing many more comments from our younger renters insisting they don’t want to be trapped by a mortgage so early in their careers.

What about renters from overseas?

It has been suggested that with less migration from Europe there will be less demand on the housing market and therefore less opportunity. The English Housing Survey of 2015/16 showed that nearly 25% of all rental properties were occupied by people not originally from the UK and it would be interesting to see these figures post-Brexit. If this collective were to leave following the EU departure, there would be a significant impact on the housing market. From our perspective although the number of new tenancies has gone up, our numbers of foreign students looking for rental homes has decreased.  The fact is, however that there is still a continuing shortage of rental stock due high prices and mortgage restrictions, applicants still outweigh available stock 4 to 1.  So, its inevitable more people are going to be renting going forward as we move further towards the Brexit deadline and afterwards.

The rental market therefore will remain strong. The problem, however, is for buy-to-let landlords who are concerned with protecting their profits considering the increasing taxation, stricter lending and increasing regulation. The government has sent out a clear message that it wants to slow down the private buy-to-let market, despite the national housing shortage and therefore ultimately, it is not Brexit that is posing the biggest risk to the rental market, but government intervention.

Angharad Trueman - Managing Director and ARLA Propertymark Regional Representative

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