UK rental market expected to grow

There will be some monumental changes in the UK economy over the next couple of years of that there is no doubt. The EU referendum has left many investors scratching their heads wondering what will happen next and this has seen a reduction in transaction numbers over the last few weeks. However, there are many reasons to be optimistic about the UK property market in the short, medium and longer term because of the underlying fundamentals.

Strong economy

As the UK authorities look to negotiate an array of new trade deals outside of the European Union there is already a queue of countries looking to deal directly with the UK. This would seem to fly in the face of scepticism immediately after the EU referendum result and the bottom line is that money talks!

We may see a shift in trade emphasis, we may see some markets pausing for breath in the short term but the long-term prospects for the UK economy are still extremely positive. It is also worth noting that while immigration was one of the hot topics just prior to the EU referendum those who expect immigration numbers to collapse will be sadly disappointed. The authorities will very soon have the opportunity to introduce strict conditions for those looking to move to the UK with talk of a similar system to Australia. The Australian system ensures that only those with employment positions are allowed into the country with the authorities using immigration as a means of filling skills gaps.

Housing shortage

As we have mentioned time and time again, the number of new builds in the UK has for many decades now lagged demand. This ensures that there is always pent-up demand for new properties in the UK and while transaction numbers may stall in the short term it is only a matter of time before buyers come back to the market. We only need to look at recent announcements from the U.K.’s leading housebuilders to see how it is to all intents and purposes “business as usual”.

We can also expect the UK authorities to introduce yet more incentives to first time buyers as a means of supporting the housing market in the short term. If, as many expect, the Bank of England reduces UK base rates in August this will give another boost to the sector.

Rental market will take up the slack

History shows us that due to underlying demand for accommodation in the UK, as and when we see a short-term stalling in property purchase numbers there is an uplift in demand for private rental property. Many experts expect to see an increase in rental demand in the short term and despite the fact that the authorities have increased the tax burden on buy to let investments this growing demand and increasing returns should prompt renewed interest from investors.

As and when markets return to normal we will see a rebalancing of the purchase/rental markets and a return to more traditional activity. However, in the meantime there would appear to be opportunities aplenty for the more forward thinking buy to let investor.

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