Yesterday’s referendum was one of the most prominent politically charged occurrence since we joined the EU 43 years ago. Yet, news broke this morning that Britain would no longer be part of the EU; much to the excitement of some and the anger and anxiety of others. Uncertainty and turmoil have been inscribed to the future of Britain without the EU, and though the future remains unclear, it’s not all bad. However, the UK property market is a key industry that remains volatile to change. The effect of leaving may be felt sooner than we think, but what exactly will the economic effects be to the housing market?
The fact is, no one is able to predict the outcome of our exit, and it has been forecast that the housing market will remain still until the dust settles.
We have Brexit, so what’s next for the property industry?
Will Brexit be catastrophic?
Although the outcome of a situation such as this can never be certain, if we are to look back on property market changes in the past – it would seem that uncertainty never bodes well. Any alterations in rules and regulations tends to make people feel cautious about buying/selling until they are sure of exactly what is going on – which takes a bit of time – hence the property market tends to stall.
With any large event that is likely to effect the economy, such as the General Election or the upcoming referendum, the property market is always used as a means to scaremonger and sway votes amongst citizens. Buyers and sellers therefore are more tentative and more often than not the estate agents face a quiet period in the weeks leading up to said event.
David King, Head of Winkworth’s International department said:
“We saw this last year with the General Election, with a quieter period in terms of transactions in the lead up to the vote, and so we anticipate a similar effect in the lead up to Referendum. However, the UK and London in particular has always had a draw for foreign investment, not only from Europe but much further afield, and I would expect this to continue whatever the outcome, especially as people come for many reasons including schools and the lifestyle.”
Of course, the property market will be affected just as the economy is effected – so if Brexit has a negative effect on the economy then you can bet property prices will suffer the same drop.
A recent survey done by KPMG accountants earlier this year found that over half real estate experts (66% to be exact) felt that ‘Britain leaving the EU would have a negative impact on inbound cross-border investment’.
If we are to believe these experts, then we should be prepared for a sudden lack of foreign investment – a far cry from what we are currently experiencing. Central London is a hub for foreign investment, with official date from the Evening Standard revealing that ‘wealthy investors have snapped up at least £100 billion of property across London using overseas companies in the past six years’.
Although central London will therefore be hit the worst, the property downturn won’t be limited to the capital; foreign investment is substantial all around the UK.
Could Brexit be Positive?
There is the popular school of thought that if the UK was freed from EU regulations, then it would actually attract more foreign investment due to the ease of investing. If this was the case then the UK property market would actually benefit/
Implications for UK Buyers in Europe?
The same way that immigration from Europe is predicted to fall if we vote for Brexit, UK buyers looking to live abroad/ purchase holiday homes will be faced with new rules, regulation and hoops to jump through in order to do so.
However, in the same way that the UK welcomes foreign investment, countries in mainland Europe are more than happy to accommodate; extra rules, visas and money checks may be introduced however although these may make the process more difficult they won’t stop it all together.
“If, following an exit, extra rules were introduced for British buyers such as visa or money checks then the process could be more difficult. However, as with the UK, investment by overseas buyers is more often than not welcome and as such I cannot foresee any stipulations being too problematic. Instead it is likely that those looking to buy will just need to make sure they can confidently negotiate the process, which a good estate agent and lawyer with experience in these markets will be able to assist with.
It seems that Brexit is following the pattern of any big, potentially economically altering event; it is causing large amounts of uncertainty amongst property buyers and sellers alike and therefore has somewhat stalled the market.
Although its effects on the property market cannot be predicted for certain, it seems that property values will be decreasing according to a large round up of experts.
The fact that commercial property in London has already been hit doesn’t bode well; uncertainty over a Brexit vote has meant that over the past week M&G, Standard Life and Henderson have all changed the pricing basis of their commercial property funds. Property value has been cut by a hefty 5-6% already, and this is before the EU referendum has actually taken place.