WHAT DOES thre general election mean for the student landlord market in leicester?
On Friday the 9th, as the UK woke up to their alarm clocks, property investors will have woken up with as much alarm to the news of a hung parliament. Theresa May’s snap election to secure more seats backfired dramatically with Labour gains and Ukip voters returning in significant number to the red. With the Brexit fallout still very much in the mix, an immediate drop in Sterling and a minority Tory government forming, it could spell uncertain times for the property market.
Indeed, this could spell an opportunity to some foreign investors willing to take a gamble on the Sterling slump currently trading at 1.27 US Dollars in the midst of a weak minority government as it did shortly following Trump’s election and the EU referendum. However, it is worth pointing out that in both cases, the Sterling recovered and this current dip returns us to pre-Election levels, having seen an increase throughout the General Election; clearly, the markets envisioned a ‘strong and stable’ Conservative mandate.
But what does it all mean for landlords in Leicester?
Back in March, the East Midlands’ average house price broke the £200,000 mark, recording a +2.1% monthly change with February’s price. Between April and May, East Midlands property value cooled off dropping back to a +0.2% growth rate. This was no doubt due to new measure restricting buy-to-let mortgage interest introduced on the 4th of April which Simon Zutshi, leading property investor, called a ‘foolish’ move by the Conservatives and may have contributed to angering the landlord community.
And what about those young’uns?
They haven’t just angered the landlords it would seem, with speculation that the 18-24 turnout has been as high as 72%, whilst 1 million young people registering certainly backs that up. It’s quite fitting that it was a nostalgic soundbite of naughtily running through fields of wheat in her youth - that trended widely on social media - undermined her credibility in the eyes of the young. The three constituencies to make up central Leicester (West, South and East) certainly saw strong increases in Labour support. Leicester South, home to a significant 30,320 students able to vote (12,235 - UoL, 18,085 - DMU), saw a 14.3% swing in Labour votes to take the tally up to 22,823 (60.8%). They may very well have been talked around by Corbyn’s abolition of tuition fees, but data from UoL’s Press Office suggests more students are enrolling, despite high costs, and bucking the 5% fall in higher education enrollment nationally between 16/17 and 17/18. They are also predicting a 7% decline in applications from the EU, no doubt as a result of the uncertainty surrounding Brexit.
What can landlords take away from this?
HMOs will always be a very popular choice in areas with a high demand of non-related individuals seeking affordable accommodation and the data suggests the demand won’t dry up any time soon from tuition fees; the silver lining. On the other hand, the general election has thrust the property market into uncertain times. Not only could we see economic knock-on effects on house prices, inflation and mortgages rates, we now need to guess at the new government direction towards housing. Leading up to the election, the Tory manifesto whistled a new tune (which sounds very similar to ‘U-turn’), claiming that the private sector could not cope with the demand for new homes “without the active participation of social and municipal housing providers”. These providers will presumably be “ambitious and pro-development” local authorities.
But again, the nature of May’s weakened government could throw this out the window, with the 10 DUP MPs needed to pass legislation. The only thing that can be confidently said is all parties agree something should be done to increase social and affordable housing. With a new Housing Minister to be appointed sometime this next week, it will give more indication as to whether these plans will go ahead. The real question is how effective the changes will be with May’s weakened political authority in Whitehall and Westminister.
Brexit looks set to become messier
Brexit too has reared its ugly head once more, with the real possibility of stalled negotiations with a drawn out, soft withdrawal. EU and international students make up a significant 31.1% of the student population (Both DMU and UoL), and although EU Erasmus funding has been guaranteed up until the 2018/2019 entry for EU students, non-EU student numbers are set to decline, particularly with proposed immigration caps.
Nevertheless, there’s a ray of sunshine. Property investors are no strangers to gambling, and these uncertain times are no exception; they’ll continue to take calculated risks. According to a Property Investor Survey, 48% of landlords will look for further investment, compared to 45% last November and 41% a year ago. Many developers will be hitting pause on investments, waiting a while for the property market to balance itself out to some degree of stability. It’s worth mentioning that the mortgage market has stayed strong despite being tested with similar economic and political challenges in the last few years.
The experts say there’s no need for landlords to panic at this backfired snap election and implications for Brexit. They do, however, raise interesting questions over the national and student market here in Leicester. As always, we’ll wait to see what lies around the corner.
For more advice on the Leicester student and young professional housing market or for any HMO landlord help, you can head to the HMO blog www.smartproperty.co.uk/blog.