Evidence since the ‘Leave vote’ suggests Buy-to-let may be safe haven for hung Parliament

There are signs that since the vote to leave the EU a year ago, UK investors have been increasingly seeing residential property as a good home for their capital amid all the uncertainty. This is understandable. As well as offering an alternative to low savings rates and stock market volatility, there are numerous other good reasons for confidence over the on-going prospects for the buy-to-let market in the capital.

Inner and outer London buy-to-let generated among the best total returns at around 7% p.a. last year – as shown in MSCI’s Annual Residential Property Index. In addition, long term total returns for residential investment property have outperformed other asset classes including equities and bond.

Buy-to-let property still provides resilience over the long-term compared to the volatility of other assets. Indeed, recent data from MSCI shows that over a 16-year period, the tolerance of residential investment property out performed not only the other categories of property but also equities and bonds.

Stephen Ludlow, Chairman at ludlowthompson, says: “London’s appeal as a diverse and dynamic city, make it the place to live, work and study. It has a vibrant jobs market in tech, finance, creative industries, hospitality and tourism and is home to some of the world’s leading Universities. It is clear that Landlords should still invest in times even in times of uncertainty.”

Longer-term, supply appears set to continue to struggle to keep pace with demand, particularly at the more affordable end of the market. Research by the Financial Times* predicted that less than a third of the homes required in the cheapest price bracket will be built over the next five years creating an undersupply of more affordable properties in the capital. With the likely upshot that tenants will remain in the rental market for longer.

Buyer affordability may not just be a problem in the current market, but in the future too, unless supply accelerates. Generation Rent are likely to be looking to stay in good quality rented accommodation that they can consider home, at a suitable market rent, for some time to come.

One hopes also that now that the former housing Minister Gavin Barwell, despite losing his Croydon central seat, has been appointed as The Prime Minister’s Chief of Staff, his influence over the themes of the recent Housing White Paper will remain in place. The focus on promoting a “fairer deal for tenants”, in the form of longer-term leases, should be a win-win for landlords and tenants. Longer lets provide security for occupiers, yet higher net returns for Landlords.

As we promote elsewhere in this Newsletter, it is important to make the most out of your investment this summer, with buy-to-let increasingly a consumer industry. In order to attain long-term tenant loyalty, landlords will need to invest in professional management that delivers a high level of “customer” experience.

Pressure from the opposition parties generally and indeed some within The Conservative Party may lead to a softer Brexit position than perhaps Mrs May had intended. There is likely to be a particular focus a lighter freedom of movement policy- a consequence of which has traditionally benefited the buy-to-let sector.

*Financial Times: https://www.ft.com/content/86ab3126-389b-11e7-821a-6027b8a20f23