Over 2 years ago, the UK went to the polls and decided to leave the European Union, not even 50 years after they had decided to join the confederacy of countries. Not even the most seasoned economist can predict what impact this democratic decision will have over the long and short term, but already market leaders are preparing for what may come after the UK’s formal exit in March 2019.
The property market, one long invested in by international entrepreneurs and billionaires looking for a piece of prime real estate in one of the most sought-after countries in the world, will experience a similar period of uncertainty to other markets. Property developments are facing a new wave of uncertainty. Ranging from immigration impact, rapidly changing house prices and a shake-up of the market’s entire management on a legal and commercial level, here are just a few of the impacts the experts are predicting.
Rising house prices
Many pundits believe that house prices will continue to rise steadily once the United Kingdom has formally left the European Union. Depending on who you talk to, this could be seen as both a positive and a negative. The UK’s house prices have been steadily growing since the beginning of the century, with significant areas of property growth like London, due to consistently increasing demand for housing around the capital and other major cities.
Though house prices in more populous areas have begun to slow, there is little space for concern as not only are houses generally more expensive in these populous areas (the average London home is worth around £450,000), but foreign investors outside of Europe, particularly from Asian countries, continue to buy up expensive real estate. This foreign direct investment could help the property market maintain a sense of stability during the turbulence of post-Brexit Britain.
A direct impact of Brexit on the property market could be a change in housing legislation. There have long been calls for the government to abolish the stamp duty tax, which has long put off investors from buying second properties around the country. Combined with the general uncertainty that Brexit has imposed upon the UK housing market, foreign investors are reluctant to invest in the industry, which can lead to stimulated growth and a more competitive market.
Economists and political commentators are arguing that Theresa May’s government – should a successful Brexit deal go through – should reform the market to perform just as competitively as it has whilst a part of the European Union. Moreover, without the restraint of European housing laws and regulations, it may be possible for the government to put measures in place that continue to attract investors to see the UK property market as a viable long-term investment.
A potential ‘housing crash’?
What is perhaps most perturbing is the Bank of England’s warning that Britain might experience a post-Brexit ‘housing crash’ after the UK formally leaves the Union. Mark Carney warned in September that housing prices could fall dramatically by 35%, causing a crash in prices that would affect the market for months, in the event of a no-deal Brexit, as Britain could be left without the negotiated safety net it sorely needs.
The Bank of England has called this its ‘worse case scenario’, but many commentators have noted that natural market forces would keep the market steady, even if such a crash occurred. The UK economy is only one factor that determines the success of the market – consumer demand and the number of homes available are more critical in affecting housing prices. Even if a no-deal Brexit happened, it is unlikely that the property market would be too badly affected.
Though no one is entirely sure what will happen to the UK economy after March 2019, investors can be confident that the property market is one of the few likely to leave almost unscathed.