Legal changes cannot overturn the age-old law of supply and demand
Over recent years, it’s hard to escape the impression that governments have been eager to be seen to be “doing something” in the housing market. As a result, they have brought in measures which may look good to impressionable younger adults, looking to “get on the housing ladder”, for example adding a stamp-duty surcharge to investment purchases, while making it less likely that first-time buyers will pay stamp duty on purchases.
The simple fact remains, however, that the UK housing market, like every other market, is driven by the laws of supply and demand and it is no secret that there is a shortage of residential housing in the UK, both to buy and to rent.
Even if this imbalance is addressed, there is still the fact that the UK has a substantial percentage of people who are natural renters, for example, young adults, which is likely to fuel demand for rental property long into the future.
Brexit may slow housebuilding projects a lot more than it reduces demand
Only a third of landlords cited Brexit as a major concern. It may be that these landlords had their properties in areas where there is a significant population of EU citizens.
Overall, however, it is entirely possible that the main impact of Brexit on the property market will be to reduce the rate at which new homes can be built far more than it decreases the demand for residential property.
Since the A8 accession in May 2004, the UK’s construction industry has become used to having access to labour, both skilled and unskilled, from these A8 countries, later joined by Bulgaria, Romania and Croatia. If this pool of labour dries up, then property developers will be forced to work at a slower pace.
Property is an investment class for people who think and act long-term
Perhaps the slew of financial and regulatory changes in the buy-to-let market will actually be of long-term benefit to committed property investors by shaking out people who understand that there’s profit to be made in property, but who don’t really have any great interest in buy-to-let itself. These would include, for example, so-called “accidental landlords” and other casual investors. This has the dual benefit of reducing competition between landlords and making for a more professional environment, which reassures both the public and regulators and could make it easier for landlords to make their voices heard.
At the same time, those exiting buy-to-let as landlords could find other opportunities to invest in the property market, or even continue to participate in buy-to-let through buying shares in companies active in the market.
Mark Burns is the managing director of property investment firm Hopwood House.