Landlord and investor confidence remains high, despite Brexit uncertainty and tougher lending rules

03 April 2017

The Shawbrook Client Barometer reveals clients' expectations for the market in 2017…

Despite being faced with uncertainty as the UK prepares to leave the EU, landlords and property investors are broadly confident about the prospects for the property market according to Shawbrook Bank’s Client Barometer*.

The survey, which focuses on the outlook for 2017 from property professionals and the expectations they have for their own investments, found that 4 out of 5 landlords (81%) feel confident that their property portfolios will perform well over the course of 2017.

On top of this, the research reveals that confidence in the lending environment has gone up since just after the Referendum result last year, with 60% of property investors stating they feel confident about the lending environment during the course of 2017, compared to 58% in July 2016**.

Helping to boost this optimistic outlook, investors revealed that tenant demand remains strong with nearly one out of three (30%) landlords seeing a rise in renters when comparing the first half of 2016 to the second. As well as this, half (50%) also saw increasing rental income over the last year.

This feeling of confidence extends to property professionals looking to invest in buy-to-let property. Two thirds (66%) stated they plan to acquire an additional buy-to-let property during the first half of this year, in spite of potential political upheaval following the Brexit decision. In fact, of those who responded stating they aren’t planning on investing in more buy-to-let property, only 9% said they are waiting to see the longer term impact of the EU Referendum. The reductions to tax relief introduced from April 1st 2016 were of far more concern to property investors, with 42% listing this as the main barrier to further investment in buy-to-let.

When considering the challenges facing investors, over a third (35%) said that it was these tax relief changes that have affected them the most so far with the 3% extra stamp duty levy coming in a close second (33%). However, one in four landlords (23%) said they have not been impacted by the changes to housing policy at all. When looking at the responses, this view that housing policy changes have had no impact could be down to levels of awareness, as 19% of investors admitted they still had little or no understanding of the changes.

Of those property professionals who said they had felt the impact of these changes, six in ten (57%) plan to raise rents, while almost half (48%) plan to set up a limited company for their properties to mitigate the effects – further demonstrating the attractiveness of special purchase vehicles (SPVs) going forward.

Karen Bennett, Managing Director of Commercial Mortgages at Shawbrook Bank comments:

“It’s great to see our clients feeling more confident about the lending market than last year and despite uncertainty surrounding Brexit, landlords are still optimistic about the performance of their portfolios. With Brexit negotiations officially underway, as well as recent changes to housing policy, it is encouraging that the market doesn’t seem to be slowing.

“Following last year’s tax changes it’s clear that investors are still getting a feel for how the changes will affect them. It is also evident that landlords have made an effort to understand how these new policies affect the way they do business, although the fact that 19% of those asked have little or no understanding of these changes means there is still work to be done. The onus is on both lenders and intermediaries alike to drive education in this vital area, and this is something Shawbrook will remain ferociously committed to in 2017.

The amendments to housing policy have presented some challenges, and we may start to see wider consequences as a result such as landlords hiking rents to combat the negative impact of such measures. The fact that interest rates have remained low for now means that landlords will continue to enjoy some relief, but things may change if inflation continues to go up and the Bank of England is forced to raise interest rates.

“As our exit from the EU is now officially underway, the full effects of Brexit are still unknown - however it’s very positive to see that despite an unclear long term outlook, Shawbrook customers continue to focus on the many potential opportunities available to them.”