House prices were a major part of both campaigns in the EU referendum. The Remain campaign predicted the economic shock of Brexit would sharply increase the cost of mortgages, resulting in a potential fall of 18% to UK property prices. In contrast, the Leave campaign has either dismissed these claims as cynical fearmongering, or actually welcomed them as a chance for priced-out renters to finally struggle on to the property ladder.
So, how is Brexit likely to impact on UK property prices?
Stick with the fundamentals
Despite the arguments raging today, the fundamentals supporting the housing market have not really changed. Brexit has undeniably caused a degree of doubt and uncertainty in the market. Nevertheless, the top reasons why investors favour the United Kingdom will still be the same after Brexit.
Great legal system
Unlike many countries, the UK’s system of law and order is not only historic, but also widely admired and highly efficient. Property rights of owners are well protected, meaning investors can feel secure that they truly hold the title of an asset.
Top notch education
Our schools and universities are world-class. This not only promotes wealth and jobs, domestically supporting the housing market, it also attracts international investors.
London is often ranked as the world’s top financial capital. The UK is ideally positioned between east and west time zones. Our stock exchange is also the largest in Europe. English is the dominant language for global business. And we have the best financial compliance and regulatory standards available anywhere in the world.
Supply and demand
As most people know, for many years the UK has not been able to build enough homes for our expanding number of residents (especially in densely-populated London). Demand for British property, domestically and internationally, has consistently been strong and delivered a return on investment. Simple market forces of supply and demand should see this momentum continue over the long-term.
Business as usual
Critics might argue that property prices have dipped recently in London and the south-east. However, this is not true for the whole UK: many areas (e.g., Yorkshire and the East Midlands) are still growing as buyers continue to exhibit confidence. Rather than Brexit worries, changes in Stamp Duty tax have probably done far more to cool the housing market this year…
However, if we 'follow the money', it's clear that international businesses still have great faith in the UK. Indeed, foreign direct investment has been massive in 2018, outpacing the value of France, the Netherlands and even the US. The tech sector is especially healthy, attracting more investment than France, Germany, and Sweden combined! This means that demand for commercial property is now particularly high, with commercial landlords receiving strong interest from China and East Asia.
In short, there has been no sign of any great ‘Brexodus’ to date in the UK property market, which bodes well for the near future. The fundamentals are good: the UK will still be a great place to work and live, with desirable domestic and commercial property, whatever happens next with Brexit…
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