After a difficult year for landlords and tenants alike, and on the week No 10 rules out Brexit deal talks to continue into the new year with the future relationship expected to be concluded in the coming weeks, it’s a wonder what the rental market will look like in 2021. Jeremy Robinson, CEO of UK rent guarantor service Housing Hand, acutely summarises: “The only thing certain about the UK rental market following Brexit, is uncertainty.” With such instability already injected into the market from coronavirus, are things likely to take a dramatic downturn after we finalise a Brexit deal?
There is no hiding from the fact that the restriction of the freedom of movement Brexit will bring means that fewer European citizens will be able to travel, work and therefore rent in the UK, at least in the short-term. The reduced supply of EU tenants and increased competition from European landlords with lesser travel restrictions means that rental prices are likely to drop. Coronavirus has already meant that in the last year with increasing unemployment less people can afford to rent, especially in inner cities, and rental prices have dropped significantly due to the fall in demand with the cost of a room plummeting by almost a third in some central postcodes. These growing unemployment figures seem to show no signs of slowing down into the new year. A lot of financially stable renters have decided to take the plunge and buy with the government introducing the stamp tax holiday, further lessening rental demand.
In contrast, there’s an argument to say that the reduction in demand could be negated slightly by the expected increase in university students attending universities across the UK next year. With coronavirus taking the world by storm many university students decided to defer their education for a year, now with a vaccine set for release and universities far better equipped to manage any kind of outbreak of the virus, a huge influx of students are set to begin or resume university (many of whom are international students). On top of this, there was a significant increase in international students attending university in 2020 who had to return home upon the outbreak of coronavirus, as the growth in international students in the UK consistently rises year on year. Housing Hand claims that 30 percent of first year students live in privately rented accommodation or with parents, plus another 30 percent who live in purpose-built student accommodation. If private landlords are to refocus their target market there’s no reason they can’t take advantage of this demand.
Having said this, individual property investors need purpose-built student accommodation and housing to invest in and rent out and the likelihood is that in the short-term raw materials are less likely to be readily available for construction to build or for building transformations due to more restrictions to freedom of trade than those that will have been previously in place before Brexit. New proposals for student accommodation and housing generally being completed on time will make a world of difference to the money investors get back and how quickly they get it. This may put many people off investing in the short-term, especially after coronavirus has already slowed down the speed at which raw materials can be received for construction. That being said, the government’s stamp duty holiday incentive has encouraged many to invest in new builds and will have undoubtedly balanced this. There’s also the argument to say that in the longer-term we don’t know how the rental market will look. There’s just so much uncertainty heading into the new year – the terms of the Brexit deal are still not completely agreed, the unexpected property boom induced by the stamp duty holiday is now coming to an end in March, and then there’s the impact of the coronavirus vaccine being released to the public way sooner than expected to consider which should encourage people and in turn the economy to get moving once more creating more demand in the rental market.
Jeremy Robinson summarised it best when he pointed out that the only certainty heading into the new year was uncertainty. Four years down the road from the referendum the terms of Brexit have still not been completely agreed. Whilst we can be certain of some negative short-term effects resulting from restrictions of freedom of movement and trade, there is nothing to suggest that these won’t balance out long-term. The government’s ‘help to buy’ scheme and stamp tax duty incentives will have ensured some vital investment in what could have been extremely troubling times for the property market. Now, suddenly with a long-term end to coronavirus seemingly in sight, there’s nothing to say the negative short-term effects of Brexit will not be somewhat negated by the improved coronavirus situation and an increase of movement, movement that coronavirus abruptly put to a halt.