Subscribe to our monthly newsletter

Get the knowledge and inspiration you need to help you build
a profitable portfolio - straight to your inbox!

Insight & Opinion

What leaving the EU could mean for property?

Author: Staff

A

A

A

A

When the results came through for the EU referendum in the early hours of Friday (June 24th), and it became clear that British voters had sided with the Leave campaign, many people have been left wondering how it will affect them.

Different sectors have reacted to the news and those in the property industry have been one of the most reactive however, the sentiment from many experts has been a positive one.

The property industry and the Remain camp expected that the market would return to business as usual if the UK voted to stay however, under the Leave vote, many people have been asking what will happen to the UK’s safe haven status?

Some think the property market could dip in the short term however, for those operating in certain sectors, there are still expectations that not all that much will actually change moving forward, and Brexit actually offers opportunities that, were they to be grabbed, could allow property to flourish.

What will happen in the short term?

Throughout the last few months, we’ve seen the number of house sales fall thanks to the fact people were waiting to see how the country would vote.

Now that we have that result, there are some positives on the horizon that may well help to settle buyers and start to attract people into a market that could serve them well as an investment option.

The Brexit vote, while not what was expected, gives the government the power to drive the property market forward.

For one, people have confidence in this Conservative government in the sector, as we saw last year when its election was met by a swell of buyers in the weeks after the general election.
In addition to this, the result will mean that the government unveils a new Budget in the next few months, much of which would likely focus on taxation. Having the ability to make changes in tax terms would mean the government having the power to boost the property market if it chooses to.

For the time being, experts in the industry believe that it will be ‘business as usual.’

house-prices

House prices

Some industry commentators have hotly debated the property market’s reaction to the vote however, the market fundamentals should remain the same.

    – Housing Shortage
    – Affordability of mortgages
    – Strong rental market
    – Population Growth

Domestic buyers drive the UK’s property market and no matter what is happening economically, people still need somewhere to live. The vote could create opportunities for homeowners to move up the property ladder as prices level out and it could provide first-time buyers with a helping hand.

We are yet to see how the market will react to the news however, the current undersupply of housing, coupled with demand could me that prices will stay at their current high levels.

In light of the result of the vote, many experts believe that interest rates could go down.

Earlier today the Bank of England governor, Mark Carney, stated, “The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward.”

Interest rates are likely to remain low which will, in turn, attract buyers to the market. Now that the vote has been decided, many people will be confident purchasing property with fixed rate mortgages.

forigen-investment

Foreign investment

In the short term, one reality that we could see is that the levels of foreign investment, particularly in the buy-to-let market, might pick up somewhat.

The market could potentially see an influx of investment from overseas investors in light of the current value of the pound. This could end up being a positive for UK property.

Foreign buyers will now be seeing the UK as somewhere they can get themselves housing stock without having to pay as much as they have done in the past. The sustained demand for rental homes will probably mean that they still see the UK as a viable option. And with the pound having dropped below 1.32 against the dollar on Friday morning, and continuing to be volatile, many overseas investors, particularly those from Asia, will see this as their chance to get more for their money in a market that potentially offers them so many positives.

What’s more, experts predict that Chinese investors will not be put off buying property in the UK as a result of the vote.

The UK has been progressively open to investment from China which has encouraged activity across the country. In recent years, cities such as London, Liverpool and Manchester have benefitted from an influx of Chinese property investment. The country’s clear property laws and the current favourable exchange rate will no doubt continue to attract investment from overseas.

rental_rates

The Private Rental Sector (PRS)

Earlier this week, experts predicted that the UK’s private rented sector (PRS) would be the one area of the market that would be relatively unscathed in the face of Brexit, with the Association of Residential Letting Agents’ members saying they believed the market would continue as it has done for some time. After the fact, it seems that many still believe this to be the case.

The result of the vote will probably mean that some people will wait to see what happens in the years ahead. This demographic is therefore likely to remain tenants for a number of years, boosting the UK’s already five-million strong rental market.

In recent months, the UK’s private rental sector has recorded record rental prices with many citing that more should be done to curb the rising cost of renting.

Landlords are therefore likely to see increased returns as demand continues to grow and helps foster a surprisingly healthy PRS among a housing market which will, in general, be balanced precariously.

protfolio

Alternative property sectors

Industry experts think that the non-discretionary nature of the student and healthcare sector could see returns remain high in a time of economic uncertainty.

However, no one truly knows how the healthcare, student and commercial property sectors will react to the result of the referendum.

Care homes and student rooms have been known to perform incredibly well in times of economic uncertainty as they play an important part in the UK’s housing crisis.

Freeing up residential property through the construction of purpose-built student accommodation has played a key part of reshaping the housing sector in many student towns and cities.
After the financial downturn of 2008, the student property sector emerged as the UK’s number one performing asset class for property investors.

Property assets such as student property and care homes which can provide an assured income, will continue to be a popular choice for investors, as they will pay a fixed income in a time when the dust is still settling on the rest of the UK’s property market.

You may also like: