Debate over whether Britain should leave or remain part of the European Union has been raging since Edward Heath’s Conservative government passed the European Communities Act in 1972.
As the EU referendum approaches ever faster, Denhan Guaranteed Rent looks at the five common questions relating to the rental market if the hotly debated Brexit if voted for on 23 June.
The views of landlords and buy-to-let investors who provide homes for the UK’s 4.3 million households living in private rented accommodation are divided about whether Britain should continue its 43-year membership of the EU.
Some fear it could harm the British economy, and therefore property values, immediately. Others think it could increase demand for rental property in the short term as residents of other states move to London before we close our borders.
Buckingham Palace insists the Queen is politically neutral over the EU referendum and we take a similar stance to Her Majesty. However, that does not mean Denhan hasn’t considered the following questions…
If we vote Brexit, can the government ignore EU rulings such as the Mortgage Credit Directive?
No. Only Greenland has ever left the 28-nation EU. 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 votes to quit 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?
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.
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, 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.
Whether Britain remains in the EU or not after the referendum on 23 June will do nothing to stop Denhan Guaranteed Rent working to maximise landlords’ returns from their property portfolios. For more information about our rent guarantee scheme, click on the button below.