Brexit and property investment: The facts rather than the fiction

Business Insights

Yes, we mentioned the dreaded ‘B’ word.

Like most of the UK, the EU referendum probably seems like a distant memory (or vague recollection of a horrible nightmare), regardless of which box your cross went in.

Yet here we are.

Still not out of the EU, still fearing a no-deal scenario and still reading blog after blog about how the UK property market will be decimated by such an outcome.

Yet people are still buying, selling and renting.


Because the basic human need of a roof over one’s head will always exist.

Okay, property transactions are down across most of the UK and that’s one myth nobody can dispel.

But people are still moving, people are still renting great properties and property investors are still investing.

But prices are going to drop by 30%. The Bank of England said so…

Firstly, they said ‘could’ drop.

The truth is, nobody truly knows what will happen to property prices and the forecasts vary depending on who you want (or are forced) to listen to.

But let’s look at the ‘now’ stats (according to Dataloft Inform)…

  • UK house price growth in year to April 2019: 1.4%

  • Transactions in year to April 2019: -4.3%

  • Average rents in year to May 2019: 1.3%

And the telling figure in all that?

Average rents are rising.

And that means increased profits for investors, particularly those willing to invest in Houses in Multiple Occupation (HMOs).

The flexibility renting provides means for the Millennial generation, in particular, renting is a choice rather than a necessity.

And you thought all those newspaper stories - bemoaning property prices and highlighting the weight on the shoulders of wannabe first-time buyers - was a fair representation of a generation?

When it comes to shared living in HMOs, this is also an active choice for many of the renters who live in more than 1,000 properties owned by investors in our network.

Shared living is cheaper than renting a single tenancy property.

It also results in lasting friendships and lifestyle improvements for the thousands of professional tenants who rent high-end rooms in our network’s properties.

So, the tenants are out there…

But there are fewer properties to buy as an investment, right?

Yes, transactions are down and there are fewer properties on the market as we move through the Brexit swell.

But we’ve seen from our own investors, that a little outside-the-box thinking and creativity can turn almost any property into a profitable HMO.

In his autumn 2018 Budget, Chancellor Philip Hammond ringfenced a whopping £1.5bn to boost Britain’s ailing high streets.

This included a potential relaxation in planning laws for boarded-up commercial properties to be turned into residential homes.

Several Platinum Property Partners investors have already successfully turned commercial properties into HMOs, including Liam Gallagher who turned a former hotel and nursing home into 12 and 16-bedroom HMOs.

That’s two new, high-end homes for 28 people at a time, when the need for housing in the UK has never been greater.

So the buy-to-let boom isn’t over?

For some, that may be the case.

Landlords have been faced with more legislative and regulatory change than probably any other sector in recent years.

That has included:

  • Changes to tax relief on buy-to-let mortgage interest

  • Tighter regulations on Minimum Energy Efficiency Standards (MEES)

The result?

Many landlords have decided that increased costs and more red tape are simply too much and have left the private rental sector completely.

In March 2019, there were 5,000 buy-to-let mortgages issued in the UK, according to UK Finance – down 9.8% on the previous year.

Rental yields have also fallen in many areas of the UK as landlords take continued hits on their margins.

Our investors, though, have continued to see their HMOs generate a 15% return on investment on average.

Despite Brexit.

Despite all that legislation.

They’ve also seen fewer void rooms, with tenants staying put for longer, and have been able to access attractive mortgage rates thanks to the HMO model’s ability to pass affordability stress tests.

Still sitting on your hands?

We get it.

Fear of the unknown takes hold and, let’s face it, given how Brexit has gone so far, nobody can really claim to have any clear idea on how things are going to pan out.

But those core human needs remain and always will.

So, with that in mind, now is as good a time as any to take the plunge on a property purchase, sell your home to move to the next step or look for a new rental property that suits your needs.

And for investors, or those pondering that step into the property investment world, the robust, shielded business model of HMOs means Brexit need be nothing more than a mere bump in the road.

This article comes courtesy of Steve Bolton, Founder of Platinum Property Partners a specialist property investment franchise, who have created a HMO e-Guide to help people understand what they are, how they work and their potential to create an income four times the amount of standard buy-to-lets, even in today’s market. Download it here.