June 27, 2016
Britain votes for Brexit
Changes in the UK property market will be a slow process as we transition towards a post-Brexit Britain. This, of course, will bring uncertainty over the coming months. Such jitters are inevitable and understandable, but on a more positive note buyers and sellers – who had been holding off on their decisions until the outcome of the vote was revealed – will now look to move forward with their decision-making. Market slowdown, which always occurs before times of uncertainty like general elections or the EU referendum, is now expected to ramp up again as buyers and sellers adapt to the new environment.
In London, which voted overwhelmingly to remain a part of the EU, there are some fears that the sales and rental markets could be adversely hit by a Brexit. But many suggest that the London market is strong and tough enough to come through any turmoil that might occur. Given the capital’s attraction to overseas investors and many of the domestic population as well, it seems unlikely that demand and activity in this region will wither away anytime soon.
Overall, the UK property market is seen as resilient as a house purchase is usually seen as a long-term investment, regardless of the financial climate. We don’t know for sure what will happen with the economy – the current turmoil might only be short-term – so house buyers will tend to look further into the future when it comes to purchasing a home.
While uncertainty undoubtedly brings with it risks and challenges, the property market showed in the wake of the 2008 global financial crisis how robust it could be and there is no suggestion that the economic woes will be anywhere near as bad now as they were then. Once the market has adjusted and adapted, there is cause for optimism that the property market will carry on largely as it was before.
In the short-term, some sellers are expected to take stock/review their options. This pause is likely to cause a reduction in housing transactions as buyers assess the impact on the economy before opting to buy and sellers question whether now is the right time to sell.
International investors, on the other hand, are expected to take advantage of the fall in the value of the pound against the Euro, using these more favourable post-EU referendum conditions to snap up property for cheaper prices. In or out, places like London, Manchester, Oxford and Birmingham still have significant appeal to overseas investors – especially London, which often operates in its own separate, global bubble.
Industry bodies such as the Residential Landlords Association (RLA) and the National Landlords Association have called for calm, arguing that knee-jerk reactions to Brexit could cause damage to the already weakened buy-to-let sector and to the confidence of landlords in an already overwhelmed market. Rules and regulations would change once Brexit is carried out, but there is as yet no timeframe on this.
While Britain is still in the EU, the lettings sector will continue to benefit from inward migration from the EU. Until we know more about the new deal with the EU – and whether this includes free movement of people – it’s hard to know for sure how the lettings sector will be affected.
Having said that, Brexit is unlikely to hit demand too hard given how popular the private rented sector (PRS) has become in recent years. Like the sales market, the lettings sector is seen as strong and resilient enough to overcome any bumps in the roads, if said bumps should materialise.
Many believe that the rental market will carry on as normal, while others believe that – after short-term turmoil – the market will come out stronger on the other side.
For advice and guidance on the London property market, please get in touch with the team at any of Atkinson McLeod’s five offices here.
If you’re thinking about selling or letting a property, find out how much it could be worth by gaining a free instant online valuation.