What now for Landlords in Bristol after Brexit?

The best argument against democracy is a five-minute conversation with the average voter. – Winston Churchill

Friday, 24th June 2016 was one of those days when you knew history was being made in front of your eyes much like, but obviously not, as tragic as 9/11.  But on Saturday the sun rose, England beat Australia at rugby and it rained AGAIN, and despite the pandemonium in Westminster and the City, life still goes on for us letting agents and our Bristol landlords.

A new word entered the English language this weekend  - Bregret - meaning the regret of a Brexit voter after he or she realised what they had just done. 

I make no bones about the fact that I felt remain was the best option for the country. 

I have no love of the EU but felt that in uncertain times it is best to be on the inside looking out, rather than be on the outside looking back in.  But we are where we are and so here I am looking at what this means for the property market and residential lettings in particular.

Mortgages

The swaps market is now pricing in a 15% chance of UK interest rates turning negative over the course of the next year, on the back of the EU referendum result.

The market is also giving a 50% chance of an interest rate cut in July, a 65% chance of a cut by August, and an 80% chance of a cut by the end of the year. 

It is entirely possible that mortgages will become cheaper.  So if you are looking to re-mortgage in the next 3-6 months, then this could be a good time to consider it.

Buy to Let Property Prices

There was an 85% reduction in buy to let mortgages in April compared with March as purchasers raced to get their purchases completed by April 1 to avoid the increase in Stamp Duty.  This lack of activity had not yet filtered down to vendors with many refusing to negotiate thinking that the market was the same as before.   Well it isn’t the same and Friday’s events have only exacerbated the situation.  We have already had correspondence from buy to let landlords looking to reduce their offers in light of Brexit, and I suspect there will be more in the coming days. 

I asked Mark Leese of Leese and Nagle estate agents and he expects a 4-6 month period of relative inactivity with a return to normal service thereafter.  However he did point out that they sold 4 Bristol properties over the weekend so it’s not all doom and gloom.  However if you are contemplating a buy to let investment, now might be a good time to start looking in earnest.

The Lettings Market

Many of you have EU tenants.  I have written on several occasions about how Bristol has become attractive to highly educated foreign tenants particularly from Spain, so what happens now? 

Put yourself in the shoes of a young Spanish graduate.  There are no jobs in Spain, and the country's economy is still on its knees. There have been 2 elections in the last six months and the country is in more political disarray than we are.  There is a two year window for you to take advantage of the free movement of people before the UK leaves the EU. 

What do you do?

I think there is a strong possibility that we will see a surge in EU immigration while we are still members, and more people means greater demand for accommodation and more demand means higher rents.

So the future is bright or is it?  Let’s look at an alternative vision:

On Saturday 18^th June we had a customer from a relocation company come to our office.  He was looking for 45 properties over the next two years for an American company that was making Bristol its European head office.  We were asked to start scouting potential properties.  On Friday the plug was pulled by the American company, as they hadwanted a country that was going to be in the EU to be their European base.  Uncertainty is what business hates more than anything and the one thing that is certain is that we we are in uncertain times.  Expect recruitment and investment to fall as businesses of all sizes take stock and wait until we at least have a new Prime Minister and see what he or she will do vis a vis Brexit.   

Conclusions

Firstly, let me say that these are my personal opinions, I know as much or as little as the next man.  All I have done is look at the anecdotal evidence and below are what I hope are informed guesses: 

• If you are thinking about a re-mortgage, now could be the time to do it
• If you are thinking of selling, unless you have to, then now is not the time to sell
• If you are thinking of investing in buy to let now is a good time to look, however I would not gamble on “up and coming” areas.  Look for investment opportunties in St Andrews, Horfield, Bedminster Southville and Totterdown areas already popular with young professionals and that have a long term history of good yields
• And finally I would remind you of Corporal Jones immortal words in Dad's Army – DON’T PANIC, DON’T PANIC!