As the No.1 HMO Property Management Service in Manchester and Salford, we were watching the election unravel with a keen eye as we tried to establish what it could mean for landlords in the student and young professional rental markets. Manchester Central saw a massive 77.4% vote for Labour which should come as no shock. However, of more interest was the result coming out of the Salford & Eccles election that echoed the nationwide story. Rebecca Long-Bailey retained her Labour seat with an increased majority of +16.1% whilst Jason Sugarman made +4.9% on the previous election for the Conservatives. On the other hand, Ukip saw its electorate return to their traditional red and blue allegiances. Across the UK this was very much the same story, with the Tory momentum of recent years gaining +5.5% of the popular vote but failing to win crucial swing constituencies.
Sterling slumped in the early hours of Friday following the result as it became apparent the UK would wake up to a hung parliament. Sterling’s relative weakness against the dollar will have several knock-on effects. The more audacious of large foreign investors may choose this time to buy up land, whilst property prices and the mortgage market will take a hit nationwide and put the first time buyer on hold. However, the currency markets have a habit of wildly reacting to political events before eventually steadying. Likewise, following Trump’s election and the EU referendum, the Sterling recovered and this current dip returns us to pre-election call levels, having seen an increase throughout the campaign period. Clearly, the markets envisioned a ‘strong and stable’ Conservative mandate.
What does this mean for Manchester and Salford’s landlords?
Brexit. Despite being banned from conversation in many a local pub, it continues to rear its ugly head. The UK’s decision to leave the EU has been further complicated by May’s weakened minority government. It reopens the question of a hard or soft Brexit, with a further General Election (and potential change of leadership and negotiators) likely later this year or early next year. A hard Brexit could prove to be disastrous for the property market nationwide as well as in Manchester and Salford. With May’s already tighter restrictions on visa applications and the very real possibility of a similar situation for EU nationals, the resultant property dump could lead to mass house price deflation.
And for the student HMO scene?
The real worry is in the short term for landlords renting to students and young professionals. Since the UK voted to leave Brexit, the EU student population has seen a 7% decline, whilst the international student population has seen a 6% decline. Universities, and neighbouring beneficiary businesses, rely on attracting the international student contingent to bring in an estimated £7bn a year. Experts suggest the decline in international student numbers over the last five years will cost the UK economy £8bn, excluding the cost created by skills shortages in the future. The decline in wealthy tenants from overseas adds to an ongoing decline in the general student population following the hike in tuition fees for the 2012/13 intake.
Effect of tuition fee hike
Take the University of Salford’s (UoS) intake rate for example. The high intake in 2011 saw prospective students eager to get in before the tuition fee cut-off point, whilst the year they were introduced, 2012, shows a significant discouraged drop (which was -17% nationwide) and the University of Salford suffered worse than the average, with staff cuts. Numbers have grown steadily since, but Brexit and tougher immigration policy threatens to shrink the EU and international student population accounting for 16% of the total UoS student population (20,520) and even as high as 25% at the University of Manchester. It means one of two things for HMO landlords. Firstly, there’ll be less demand and an oversupply of rented accommodation whilst the fallout of Brexit negotiations will see poor Sterling performances; this means rental prices will not fluctuate with the market and so the renting sector will be worse off and out of pocket than it was. Secondly, the restrictions on working visas mean that newly graduated international students, now converted to young professionals, will be forced to leave instead of contributing to the Manchester economy.
Conclusion, is it all doom and gloom?
Absolutely not. There’s a snow globe effect surrounding the markets during times of political uncertainty; there’s just no knowing what’s going to happen. But a recent Property Investor Survey found that property investors are not deterred for long by fluctuating prices or changing markets. Indeed, the mortgage market has fared relatively well irrespective of political redirection in the last few years. In the months to come, many investors will keep an ear to the ground and play their hand when and where the information becomes available. They’ll wait for the property market to rebalance itself to some degree of stability and look, in the long term, as the investment opportunities rise from the ashes. With no signs that Manchester’s population boom will slow down anytime soon, we’ll hopefully keep supply and demand in fine balance and stave off the best part of these uncertain times.
For more advice on the Leicester student and young professional housing market or for any HMO landlord help subscribe below now!