In my last Brexit article I noted that the decision to leave the EU will immediately usher in a period of great uncertainty.
This represents a far from ideal situation for any investor – and this is particularly the case for landlords.
In this article I’d like to map out the areas that will be most critical for landlords in the future. I will visualise what the vote to Brexit may mean for you.
The wings of a butterfly
But first, I’d like to go from the solidity of bricks and mortar to the fragility of a butterfly’s wings.
The rental sector in the UK is dependent on many different influences: house prices, house supply, migration, mortgage rates, employment, legislation, and so on.
Small changes in any of these can have knock-on effects on any other.
This is known as the butterfly effect.
A small cause somewhere can have large effects elsewhere. The flaps of a wing of a butterfly may eventually effect the location and severity of a hurricane somewhere else.
It is this butterfly effect that makes making predictions so hard.
But, here goes.
Experts on both sides of the debate mostly agree that Brexit will have a negative impact on the economy, at least until the dust settles in a few years’ time.
Brexit is likely to negatively impact the economy, at least for a few years: this will lead to rent arrears and limit potential rent increases.
Brexit is unlikely to lead to a baby boom or mortality crisis, but what effect may it have on immigration.
On the face of it, it is hard to see that it will have any: currently about half of the net migration to the UK is from outside the EU. It will also be difficult to remain in the single market whilst limiting immigration from from EEA countries.
Yet those promoting ‘Leave’ have insisted we will see a reduction of immigration. If we accept this, and add that the UK’s struggling economy will no longer attract so many migrants, we may see a slower population growth.
A slower population growth, thanks mainly to reduced immigration, will have a significant negative impact on the demands for rented housing.