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How will Brexit affect landlords in London?

11 April 2016 / By: / Under: London Property News

How_will_Brexit_affect_landlords_in_LondonBuckingham Palace insists the Queen is “politically neutral” over the EU referendum on 23 June. As a rent guarantee specialist that has been helping landlords achieve the maximum rental income on their properties since 1975 (two years after Britain joined the European Economic Community following Edward Heath’s Conservative government passed the European Communities Act in 1972) we take a similar stance to Her Majesty. 

But to help the landlords and buy-to-let investors who provide homes for the UK’s 4.3 million households living in private rented accommodation, Assetgrove provides the answers to 5 of the common questions relating to the rental market if Britain votes to leave the EU.

Will Brexit mean we will not have to comply with EU rulings such as the Mortgage Credit Directive?

No. Only one member state has ever left the 28-nation EU since Belgium, France, Italy, Luxembourg, the Netherlands and West Germany established the European Economic Community in 1958.

As a part of Denmark, Greenland joined the EEC in 1973. After home rule for Greenland began in 1979, the territory voted to leave the EEC in 1982 and its exit was agreed in 1985 following intense negotiations over fishing rights that resulted in the Greenland Treaty of 1984.

But as a member of the Association of the Overseas Countries and Territories of the European Union, Greenland remains subject to EU treaties.

The Centre of Economic Performance, which is part of the London School of Economics, reports: “Prior to leaving the EU, the government would need to pass legislation setting UK law in areas currently subject to EU regulations. Whether this legislation would simply transpose EU regulations into UK law or implement new regulatory policy is uncertain.”

If Britain voted to leave the EU, therefore, it is unlikely previous EU regulations would become null and void.

And we will have to comply with future rulings if Britain joins the European Economic Area, which was established in 1994 to give European countries that are not part of the EU a way to become members of the single market.

Could Britain leave the EU immediately?

We could leave the EU in a single day by repealing the European Communities Act 1972 and its numerous modifications and amendments.

However, Article 50 of the 2009 Lisbon Treaty – the document that governs membership of the EU – states that once a country has formally announced it wants to leave, it needs to negotiate with the 27 other member states about the terms of its withdrawal.

The Lisbon Treaty allows member states up to two years to come to an exit agreement or face leaving without securing a free trade agreement or any other benefits EU membership brings.

A government report on the process for withdrawing from the EU, which was released in February, acknowledges that “uncertainty during the negotiating period could have an impact on financial markets, investment and the value of the pound, and as a consequence on the wider economy and jobs”.

Will negotiating our exit from the EU reduce the demand for rental homes in London?

It’s not unreasonable to say that the greatest threat to property values that Brexit poses is the two-year period Britain would need to negotiate the terms of its departure from the EU.

This is because in periods of political uncertainty, such as the run up to general elections, the property market often comes to a standstill.

In August 2014, the month before the Scottish referendum, the number of property sales in Scotland was 8% lower than the typical seasonal trend.

However, this is good news for landlords because it means the number of tenants requiring good quality homes is likely to remain at the same level as today.

What will happen to the rental market after Brexit is confirmed?

In macroeconomic terms, EU membership is virtually irrelevant for the UK.

This is because we are both an economic powerhouse and the value of sterling is not tied to the euro, according to Financial Times columnist Wolfgang Münchau.

He goes on to explain that the EU budget is tiny when compared with the UK government’s other fixed costs and free trade and free capital movement is highly likely to continue whether Britain leaves the EU or not.

What about Britain’s right to enter the Eurovision Song Contest?

Assetgrove prides itself on its knowledge of the property market within the M25, not arts and entertainment. However, we are aware that entry into Eurovision is not dependent on EU membership (Ell & Nikki from Azerbaijan – a nation not yet in the EU – won Eurovision in 2011).

Whether Britain remains in the EU or not after the referendum on 23 June will do nothing to stop Assetgrove working to maximise landlords’ returns from their property portfolios. For more information about our rent guarantee scheme, contact Assetgrove today.

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