Why Brexit Has Not Affected the Property Market as Predicted
Before the EU referendum in June 2016, various media outlets were warning of a “post-Brexit apocalypse” for the property market, should the public vote in favour of leaving the EU. So why has that not happened?
Before the referendum, there were various warnings of the potential effect that a Brexit vote would have on the property market. The most pertinent were that property prices could tumble due to less demand, and even ex-chancellor George Osborne warned that house prices could fall by over 18% should the British public choose to exit the European Union. Now we have had time to let the dust settle, we can explore the real immediate impact Brexit has had on the property market.
The UK Still Remains Politically Stable
Despite politicians resigning, internal political wars and leadership contests, the UK as a whole remains politically stable, and a viable place for investment. Companies and investors are still willing to spend money in the UK. Major pharmaceutical company GlaxoSmithKline has invested £275m since Brexit, stating that the UK was still an “attractive location”, and London City Airport is getting a £344m expansion. According to the BBC, Siemens, the largest engineering company in Europe, has also pledged to continue investment in the UK despite the Brexit vote.
Property Investment Sectors are Predicted to Weather The Brexit Storm
There were concerns that if Britain left the EU, universities would hike up fees for students looking to study in the UK from EU countries. These fears seem to have been somewhat allayed, as UCL was one of the first higher education institutions to announce that it will not increase tuition fees for students from within the EU studying in the UK. This reassures prospective students and therefore the demand for student property will be unaltered. It is also worth noting that EU students make up just 5% of the total number of students in the UK according to a Universities UK report.
Other sectors such as care home investments are also predicted to weather the storm. According to Investors Chronicle finance editor Kate Beioley, care homes are less likely to be impacted by Brexit because very little money is being invested in them by the government, while the demand is for UK residents only. The NHS is often reliant on third party developers and external investors, and with an ageing population, demand for care home units built with the help of private built with the help of private developers is not going to ease.
There is Still Stability in The Rental Market
According to the Association of Residential Letting Agents, the rental market is still stable despite the Brexit vote. The managing director of ARLA, David Cox, explained that “Despite reports that the housing market is spiralling out of control post-Brexit, our results paint a very different picture, and indicate that the future is bright for the rental market. Supply is up, as we’d expect at this time of year, and the number of tenants experiencing rent hikes hasn’t changed in three months. While we obviously need new houses to balance the growing gap between supply and demand, what’s positive is that the situation isn’t worsening as a direct result of June’s Brexit result.”
The rental market has reacted in a calm manner to the Brexit result, and rental figures have remained more or less the same. The supply has remained near enough the same, with 67% of ARLA members reporting no change, and 64% of members reporting no change in the number of prospective tenants. The calm response of the rental market to Brexit should help to ease potential investors’ fears that there will be a shortage of demand for their rental properties. In the end, demand is still outstripping supply. This is further demonstrated by the fact that average rents in England and Wales rose to £846 in July, and in August buy-to-let activity surged by 12.7% according to Connells Survey and Valuation.
House Prices are Stable
The Royal Institute of Chartered Surveyors has reported that despite experiencing a drop immediately post-Brexit, house prices are now stable, owing to the Bank of England’s intervention. Members are predicting a steady 3.3% property price increase per year for the next five years, mainly owing to demand outstripping supply. Houses in places outside of London are expected to fare better, and property prices in London are not expected to move for the next 12 months. Asking prices in August increased by 0.6% and annual growth in August increased to 5.6% from 5.2% in July. The perceived resilience of the UK’s property market could be down to a lack of negative sentiment since the Brexit vote.
“The property market has proven so far to be extremely resilient to the effects that the Brexit vote has had on the UK, and there are various types of UK property investments that will withstand the effects of Brexit,” says property experts at One Touch Investment. With banks such as NatWest and Nationwide reportedly slashing interest rates on their savings accounts, surely property is a viable alternative to achieve a good return on investment?
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