In truth nobody can say for certain because we are in uncharted territory and it’s that fact which will cause instability. The initial ‘knee jerk’ reaction of the financial markets are really just a shot across the bows as the move to exit the EU isn’t seen in favourable light by the world because the UK hasn’t actually left the EU yet, that will not even start to happen until Article 50 of the Lisbon Treat is triggered. Markets and economies like stability and growth; anything that unsettles the apple cart creates a nervousness and uncertainty. In lots of ways it could now become a self-fulfilling prophecy.
Over the coming months and even years we will likely see a seesaw effect where key milestones are reached along the ‘divorce proceedings’ and at each juncture there will be a perceived winner and loser in the negotiations. This will tip the markets one way or the other but with all of this we need to keep in mind that while no longer brothers in arms, the UK is joined at the hip to Europe. In April 2016 the UK exported £25 billion while importing £41 billion worth, so there is a symbiotic relationship where neither can afford to do too much damage to the other. Like we saw on Friday 24th June, the pound had a very bad day but the euro lost around 3% of its value.
It is now a case of finding the balance between stabilising the economy and stimulating growth to avoid a recession. The Bank of England will play a key role in this and thankfully so far Mark Carney seems to be one of the few men with a plan. Overall borrowing will become tougher and the base rate of interest could be used to regulate the economy. This could drop in the short term to keep worried Brits spending and keep monthly household costs down but the stability of the interest rates we’ve enjoyed for so many years could be over. Other than a fiscal stimulus, the Bank of England’s base rate of interest is the best mechanism to exert control over the economy.
Swap rates – which are often the precursor to changing mortgage rates – have been falling since the vote to leave the EU. If mortgage interest rates follow, then housebuyers and those remortgaging may see the cost of their monthly repayments become a bit cheaper. BBC News
Britain though is one of the most debt-laden countries in the world and the deficit (the difference between what the government spends and what it receives in taxes), projected to be around £69 billion a year before the referendum is the big concern. This was arguably a large concern while our economy was growing, with the ensuing uncertainty and with the fact that the UK’s outlook has been downgraded to ‘negative’ by Moody’s and other, the UK’s borrowing is only going to get tougher and more expensive.
So what does this mean for the UK tourism and the holiday let industry? Let me first caveat this by saying again nobody really knows for certain, if they did I think they would become very rich indeed! In the short term there will be no changes with regards to the way people can move around Europe and even if there are changes long term, holidaying will be easy enough, just as it is now for people to go to the USA etc. we may just need a visa.
With the pound weaker it becomes more attractive to travel to the UK for foreigners as their money will go further. And ‘staycations’ could become more popular by the same token; that going abroad will cost Brits more than it did before. This could all change but this would equal more money coming into and staying in the UK, which is good news for holiday let owners. That is the mathematical way of looking at it but there is a fear that there could be a backlash from Europeans and an effective boycott of the UK. The leave campaign, and even David Cameron in his re-negotiations earlier this year, did not have many nice things to say about the EU, it is possible that Europeans will feel aggrieved by the referendum vote. So far we have actually seen bookings increase, comparing the last week with previous averages, so the outlook is positive at present.
In terms of investment in holiday let properties I think it is accepted that growth in the property market will slow and with the right facilities in place to overcome tougher lending for mortgages some good deals can be struck. We could be faced with increased demand for all the reasons above and properties being accessible in a slower market, providing an opportunity for a good return on investment. With the recent tightening of tax rules on ‘buy to lets’ holiday lets are seen as a lucrative alternative.
A recent blog by Simon Misiewicz explains some of the tax advantages to holiday lets: http://www.propertytribes.com/are-holiday-lets-the-next-big-thing-t-127624358.html
Related articles: After Brexit will more of us take our holidays in the UK? http://www.bbc.co.uk/news/business-36651466
Dan Whiting – The Bath Holiday Company www.holiday-lets.com
Picture by Adam Calkin