Trends show that many residents will delay in buying property during periods of turmoil and uncertainty, which appears to be exactly the current situation in the UK amid growing Brexit confusion. According to HomeLet’s chief executive, Martin Totty, this could result in positive news for buy-to-let landlords, as more people will consider renting rather than risk entering the housing market.
Most industry experts are predicting single-digit, modest house price growth for 2019, despite the uncertainty surrounding Brexit, but Mr Totty stated that he expects the UK will see generally strong rates of growth in rental prices. He also predicts that the upward trend in rental prices is unlikely to change in the future, especially in the short term, alongside an unchanging high demand for privately rented homes.
High deposit levels, in addition to an increase in interest rates from the almost all-time lows currently in place, would result in the affordability of home ownership becoming even more challenging, in particular for first-time buyers.
HomeLet, as an insurance and tenant referencing specialist, are regarded to be well positioned to analyse the events and trends of the private rented sector, and especially rental prices, due to their large, up-to-date data pool of agreed rental prices on new tenancy arrangements.
Martin Totty also points out that the latest data from HomeLet has shown that the average rent per month is now at £921 from December 2018, or £763 if London is excluded from the data. This is an increase of 1.5 percent year-on-year, or around £14 each month. However, this rate of growth is still below the current rate of inflation in the UK, which was last reported as 2.3 percent by the ONS (Office for National Statistics).
Mr Totty explained that without large deposits, people entering the home ownership market could find themselves facing a longer term mortgage. Many providers are now extending the maximum term of mortgages to around 40 years. HomeLet’s data has shown that the average age of tenants is currently 32 years old, which means that if these tenants choose to buy homes, they could be making mortgage payments until post-retirement. Making the biggest purchase of their lives could become a huge risk if made at the wrong time, with uncertainty concerning mortgages at a time when jobs, the UK economy and mortgage rates could be greatly affected by Brexit. Many are instead waiting to make home purchases.
This equals positive news for buy-to-let landlords, despite increased intervention, regulation and taxation from the current Government. Nine of of ten landlords plan to expand or keep their current portfolio into 2019, according to a survey by HomeLet of 2,900 PRS landlords. This is despite the fact that one-third of those questioned also expressed concern over the potential implications from Brexit.
The potential risk of Brexit to landlords would be an economic slowdown, which could lead to unemployment, with tenants struggling to pay their rent each month and defaulting if their circumstances unexpectedly change. However, there is specialist insurance available to safeguard rent payments which would minimise this risk.
Times of uncertainty have proved beneficial to the rental sector, as people become increasingly risk sensitive, with renting providing the solution to help reduce these risks.
Ensure you are being transparent and fair – start using a property inspection app today to produce professional inventories, check-ins, check outs, interim inspections, building inspections, risk assessments and more with InventoryBase.
Start your free trial here today.