Q3 2018 was Benham & Reeves Lettings’ most successful period in history, with a record number of new tenancies across our 16 London branches, representing a 22.1% increase in transactions over the same period in 2017. We saw rental demand continue to grow, and tenancies renew at an incredible 70% rate.
However, it cannot have escaped anyone’s attention that Brexit has brought unprecedented changes to the property market and, with things still undecided, we’ve asked other leading property experts for their New Year predictions.
Peter Izard, Investment Specialist at Investec Private Bank notes that, “Making predictions for 2019 is almost impossible with the total uncertainty of Brexit. I can confirm that the property market has huge pent-up demand, plenty of buyers looking to move and investors looking for their next opportunity, but I suspect they will hold off until the path of Brexit clarity is clearer. The Bank of England will look to tighten rates next year but again this is all subject to Brexit. Markets hate uncertainty, as do business and investors, so until we have a clear path of the where we are heading, predicting the next a week is difficult – and predicating the year ahead impossible.”
However, the results of ARLA Propertymark’s letting agent survey do offer some insight for the year ahead. It is widely believed that both rents and demand will rise in 2019 but that increased costs could reduce the numbers of landlords operating in the marketplace. David Cox, Chief Executive, ARLA Propertymark comments: “With all the new legislation landlords have faced over the last few years, they have found themselves either being pushed out of the market or forced to pass rising costs on to tenants – a trend which we’ll continue to see this year. However, looking further ahead we firmly believe that the industry will come out stronger, more professional and better respected at the other side. The best landlords and agents will adapt and survive to the new circumstances, keeping the PRS afloat.”
It is a theme that Buyer’s Agent and Property Commentator for the BBC, Henry Pryor, continues. He comments, “2019 is going to be a challenging year for everyone involved in the lettings world. Tenants will inevitably find it harder and more expensive to rent while landlords are going to continue to feel the warm breath of the State breathing down their neck. Many will find the additional red tape, costs and hassle too much and will sell up.
“People who expect things to settle down after 29th March may have had a little too much Christmas spirit. We will have two possibly three years of ‘transition’ as new arrangements are put in place. This may take longer and at the end of it there will be a General Election assuming that the current Government doesn’t trip over itself in the meantime.
“Rents will go up as the impact of the Tenant Fees Ban is felt. Transparency comes at a cost. Tax changes will start to bite and yields that have got too thin will start to accelerate the fall in capital values that we have seen in 2018. Some landlords will still be kidding themselves that their returns are based on the price they paid for their properties but in reality they should be getting up-to-date valuations to be sure that the yield they are getting the best that they can, given the rise in house prices over the last decade. Good agents will be able to help with both predicted rents and estimates of house prices. Some casual landlords will inevitably find themselves nursing a loss this year. Those who haven’t paid enough attention will find that for the first time since the Credit Crunch making money out of property isn’t as easy as falling off a log. It’s still possible but only with effort and wise counsel.”
Benham and Reeves’ Director Marc von Grundherr couldn’t agree more about the importance of using an experienced letting agent. “While Brexit brings uncertainty, mainly caused by political infighting, and all the talk of legislative changes may leave investors feeling concerned coming into 2019, I can assure you that no matter what the new year brings, a trusted and experienced agent will work in your best interests to help you through what lies ahead.
“I can also confirm none of our corporate tenants have advised they will be reducing headcount and to the contrary, we already have a significant number of ‘new arrivers’ booked in for January and February to rent properties. I predict that rents will remain flat and I’m basing this on the fact that there is plenty of stock still to come to the lettings market in 2019 and strong tenant demand is forecast to continue.”
Propertymark’s survey once again offers some indication of the year ahead for sellers. Almost half of estate agents agree that a no-deal Brexit will have a negative impact on the housing market; 43% expect house prices to fall, 39% think supply will increase and 35% think demand will drop. Mark Hayward, Chief Executive, NAEA Propertymark comments: “As we look ahead to 2019, there’s a fog of uncertainty. Brexit is undoubtedly fuelling a sense of apprehension in the housing market, which in turn affects sentiment. With details of the final deal still unknown, both buyers and sellers will continue to hold off on making any decisions. However, this slowdown presents a window of opportunity for first-time buyers who will find more affordable properties, granting them greater bargaining power.
“We usually see demand spike in the first few months of the year, but the landscape will probably be very different in 2019 as buyers sit on the fence and adopt a ‘wait and see’ strategy until the Brexit deal is complete.”
Marcus Dixon, Head of Research for LonRes is keen to point out that the property market always has the power to surprise. “Forecasting the outlook for the prime London housing market is a far from exact science,” he says, “Following the collapse of Lehman Brother in 2009 prices fell more than 20% in the space of a year as fears of further falls caused would-be buyers to stall. But by the end of 2009 prices were rising, and by the end of 2010 were, in some areas of central London, back to their pre-crash peak. This time round the downturn has different drivers, but what past downturns do show is that the prime market can change quickly, and activity and prices can and do recover rapidly.
“Since late 2014, rising buying costs, new taxation, legislation, and political uncertainty have combined to bring about lower levels of activity in the prime London market. Rather than sell at a lower price many would-be sellers have simply withdrawn instead. More than half of homes removed from the market over the last two years have been withdrawn rather than sold and the scale of this pent-up demand should not be underestimated. With so much political uncertainty it is difficult to predict how the market will play out however, once we do have more clarity we expect a post-Brexit bounce in central London could easily follow.”
A “post-Brexit bounce” for the property market would be very welcome, for both buyers and landlords to see demand increase and, in turn, greater rental yields and capital growth. Analysts seem to agree that once the Brexit course has been decided, it could be the catalyst for plenty of movement, and during this momentum it would be very reassuring to have an experienced agent by your side. If you would like to seek advice from a residential lettings specialist with more than 50 years’ experience in the London property market then get in touch with your local team today.