Brexit causes London landlords to lose out on rental growth

The latest Landbay rental index has suggested that landlords in London are potentially £1,806 worse off since the vote to leave the EU in June 2016.

A conservative forecast suggests that rental growth in the capital is now 2.84% lower than expected back in June 2016. This, though, could be as high as 4.15%.

Working on the basis of the higher estimate, this would leave the average London landlord £1,806 short in rent due to muted rental prices. Even under conservative estimates, the average London landlord could be £1,217 worse off as a result of the vote to leave the EU.

The London property market, which has arguably suffered the most from Brexit uncertainty, witnessed average annual rental growth fall from 1.26% in June 2016 to a low of -0.33% in June 2017, before starting a slow recovery in February 2018 (up to 0.05%). By December 2018, it had reached 0.58%.

By contrast, the rest of the UK has largely stayed in line with expectations for growth, with the drop in rental price growth being limited to the capital.

In Scotland and Wales, in fact, rents are growing much faster than the UK average. Rental growth in Wales (1.57%) and Scotland (1.48%) is rising more than 55% faster than the UK as a whole (0.96%), and seeing almost twice the rate of growth of Northern Ireland (0.75%).

The UK average is continuing to be weighed down by London, where there has been slower growth of 0.58%. More promising rental growth of 1.16% has been seen across the rest of the UK.

Regionally, the strongest rental growth has been seen in the East Midlands (2.19%), West Midlands (1.48%) and Yorkshire and Humberside (1.40%), while the North East has seen growth continue on its downwards trend towards falling rents (0.01%).

“It’s hard to ignore the impact that the vote to leave the EU has had on the property market in London,” John Goodall, chief executive and founder of Landbay, said.

“While tenants are better off, without necessarily realising it, uncertainty in the market has caused a conundrum for landlords.”

He said that many landlords will have been looking to offset the ‘government’s punitive tax regime’ by raising rents. Despite this, Goodall said the uncertainty surrounding Brexit has forced the vast majority to forfeit this to maintain a steady income.

“Employment and immigration are the two main concerns for the housing market when considering Brexit,” Goodall added. “While nobody is any clearer about Britain’s future relationship with the EU, it’s clear the impact of a no-deal Brexit would be significant for the UK economy and property market.”

Goodall said that brokers need to assess the current landscape and ‘provide insight to their clients on potential issues that may arise for them in the future’.

“Despite a drop in rental growth the market continues to show resilience,” he concluded.