The managing director of lettings at Foxtons says Brexit and domestic political uncertainty have become ‘the new norm’ in the London property market.
Ed Phillips warns that the hung parliament and long-term Brexit negotiations will impact sales volumes but are likely to cause less damage to the letting sector.
“The lettings market’s flexibility makes it more resistant to uncertainty than its sales counterpart, which is vulnerable to external shocks. In fact, the lettings market becomes part of the solution when uncertainty hits the sales market. As a seller, you can always let your property until the market stabilises, either furnished or unfurnished and for the long or short term” Phillips writes in City AM.
He says the experience of the 2008 financial crisis - when sales volumes were hit - shows what may happen now.
“Sales stock levels decreased significantly as sellers put their properties up for rent instead of selling, which in turn put downward pressure on rental prices. Attracted by lower prices, tenants were keen to let for a longer period of up to three years, which provided landlords with long-term stability and benefited both parties in an uncertain market” says Phillips.
“These lengthy contracts decreased stock levels and, with an increase in demand driven by lower prices, the lettings market stabilised much sooner than its sales equivalent.”
With regard to Brexit, Phillips says Foxtons’ demographic data shows that from Q4 2016 to Q1 2017 some 33 per cent of tenants in London came from western Europe.
He concludes: “London will remain an attractive proposition to both UK and international tenants with any potential price correction only increasing its appeal. This high level of demand will aid the market’s recovery in the relatively near future. Whether the same can be said for the sales market remains to be seen.”