Effects of Brexit on UK Property Market

April 30, 2019

 

When the United Kingdom formally voted to leave the EU in 2016, it brought with it a growing wave of uncertainty. Shortly after the vote, there was a period of political restructuring followed by sharp drop in the value of the pound. There were concerns about what this would mean for the UK’s position globally, with many predicting a future of stagnant economic growth. This effect was felt strongly in the property market, with the climate appearing to be unsuitable for international investments and homeowners speculating on how the value of their properties would be affected.

However, with the Brexit process set to begin in March 2019, the outlook is brighter than is might seem. There are still ripples of uncertainty as the details of Brexit implementation have not yet been concretely outlined, but the market has proven to be resilient. On average, house prices have been on the rise since 2016, although the rate of growth has been slower than previous years. Prices have gone up at an average of 6.6% year on year according to data from the UK Land Registry. Against an inflation rate of about 5.6%, we can say that the real increase in prices has been around 1% since the vote on the referendum.

At first glance, this data might seem to confirm the worst fears of those dreading the approach of Brexit but examined more closely, the net effect of the vote has been to provide a unique buying opportunity as the currency is very favourable for investors in the current climate.

During any time of political uncertainty, there is a perception of blood in the water, which leads to frenzied activity in the market and the purchase of trophy assets and high-income earning assets that are available well below the market rate. In recent months, we have been presented with many such opportunities that represent fantastic value for the savvy investor. These options range from mix-use properties to office developments and retail schemes.

On the whole, we feel that the fundamentals of the United Kingdom and particularly London remain as they were prior to 2016, despite the changes in political climate and the recent 3% tax hike on duties. We remain optimistic that international investors will continue to recognize London as a sought after destination and a true global hub regardless of whether the UK populace refers to itself as Europeans or British. As Trump mandated to make America great again, in the wake of Brexit there is little choice but for the make Great Britain great again and we believe that investors will want to invest on the coattails of that resolve.