By Bea Patel, TLE Property Editor and Director of Shop for an Agent
On Thursday 23 June 2016 Britain faced its biggest decision for decades. We took to the polls to vote if Britain should leave or remain in the EU.
Pre-EU referendum, we saw much uncertainty in the property market, with many people approaching a ‘wait and see’ attitude to buying and selling. Experts predicted house prices could fall up to 18 per cent. Forecasts in sterling weakening opened up predictions that foreign investors would flood the market maximising on the weak pound. But some experts also said that the decrease in house prices would help first-time buyers attempting to get onto the property ladder. With much speculation and uncertainty, it was difficult to predict a Brexit effect on the industry.
Now Britain has voted to leave, what can we expect to happen to the UK property market in the short and long term?
Stuart Johnson, business development manager at Prime Centrum said: “There will be short-term uncertainty but we remain very confident in the long-term growth of the UK property investment market. The case for UK property is underpinned by a number of factors that will not change as a result of the UK leaving the EU.
UK buyers drive property demand and home owners are responsible for the majority of purchases of UK property and these buyers will still be ready to purchase over the medium and long term, especially given interest rates that are likely to remain low as the Bank of England focuses on maintaining stability. Furthermore, the overall lack of supply of property remains a fundamental factor that shows no sign of abating for many years and certainly this will not change whether the UK is in or out of the EU.”
There has also been reports of foreign investment – with investors maximising on the opportunities of the weak pound. International property portal, Properstar recorded a spike of 50 per cent in searches for London property following the Brexit announcement.
Shameem Golamy, managing director of the portal says the current market conditions look favourable for foreign buyers. He said: “Following the decline in sterling, we heard reports from agents of international buyers rushing to conclude property deals. It’s no surprise when US buyers can now acquire UK property at a third less than a year ago.”
Similar reports came from Jackson-Stops & Staff’s Midhurst branch, which agreed a multi-million pound off-market sale on Friday (24 June 2016) morning – on the back of the Brexit result. Nick Ferrier, director of the branch said: “Despite the uncertainty and tumbling markets caused by the outcome of the EU referendum, we agreed an off market sale to a buyer for a property on the market at around £5 million. The confirmed Brexit has not put off either party who are keen to press ahead with the deal. Viewing requests in the week ahead are strong and we have a number of deals underway.”
Will London’s property market be hit the worst?
Jonathan Stephens, managing director of Surrenden Invest, explains: “I don’t believe property in Britain’s emerging markets; Manchester, Birmingham, Liverpool, will be heavily affected. These regions will remain resilient and are not set to experience any real impact. It will be London’s property that is most significantly affected by the decision, slowing down the market’s recovery.
“The last 6-8 months have seen less than inviting opportunities for investors in the capital and although the result will impact the market further now, the long term prognosis is set to provide investors with increasingly better conditions. Those in the industry have been waiting for a shift in London’s investment landscape and though it may appear to worsen for the foreseeable future, the market will respond and we could see a larger correction than was predicted previously.”
With the current housing shortage and imbalance between supply and demand, house prices have risen. Time will tell if the pre-Brexit predictions of falling house prices will occur. As we enter uncharted waters, we face a ‘wait and see’ scenario. But there are plenty of people who will have to, or still want to move, so these transactions will still take place. Some experts predict short-term problems with optimistic views in the long-term.
Jonathan Stephens, concludes: “After the initial shock of the referendum result, I am now excited about the encouraging long term prospects for the UK’s housing market and its investors. “Leave” has won the day, but we believe that for the UK housing market the watchword is “Remain”. It is going to seem like a helter-skelter for all markets for the next few months, but the medium and long-term prospects for UK residential property remain strong.”
