Since the beginning of 2016, estate agents have noticed a reduction in house sales and an increase in rentals. This is because there is an increased desirability for renting, as well as fewer homeowners choosing to sell, although prices continue to rise. The expense of living in London and the problems of job instability are all playing their parts, but changes to stamp duty laws and the uncertainty of Brexit have an equally important role.
The appeal of renting
There’s been a definite trend towards renting in London over the last year, with some developers even creating purpose-built house-shares for the capital’s transient young professionals. Natalie May, Property Consultant at Henry Wiltshire Canary Wharf, explains more. “People do not know what will happen to property prices in London,” she says. “There is an element of long term uncertainty in play, which has led to people wanting to rent and test out an area, then either continuing to rent there, or moving on to rent in other areas. Renting can ultimately provide a feeling of greater achievability, flexibility, control and surety.”
More rentals available
Changes to stamp duty laws saw a boom in house-buying in March, but this has actually contributed to the increase in rentals. SDLT affects second properties, and the people panic buying in the spring were largely buy-to-let investors, not homeowners. The properties bought-to-let in March are now flooding the market, providing more rentals than ever for Londoners.
Even before the vote for Brexit, the anticipated EU Referendum was taking its toll on the property market. Uncertainty about the outcome had weakened the pound, leaving buyers worried that they’d get a poor return on their investments, and choosing to rent property instead of selling it.
One of the main groups of house buyers to benefit from Brexit has been the overseas investors. They are able to benefit from the weak pound and buy property at a huge discount. Overseas investors are often landlords rather than residents, so their post-Brexit purchases are providing additional rental property for the London market.
Stagnation in the sales market
Few homeowners and landlords are thinking of selling in these uncertain times. With a weak pound, property is one of the soundest investments and those who already own property will do their best to hang on to it. Selling is not a viable option for overseas investors with exchange rates as they stand; investors are far better off receiving a regular income from their property as they wait for a change in the sales market.
Equally, fewer people are looking to buy. Many are happy renting, as Natalie explained, but others are waiting for the UK’s economic situation to become more stable before they commit to purchasing property.
But those desperate to buy or sell need not despair, says Natalie: “Historically, when the sales market is fluid and booming, the lettings market is quiet; and vice versa. What we are seeing is the current trend, and this will no doubt change.”
We just don’t know when.