The Brexit Effect on the UK Property Market
When Article 50 was trigged in March 2017, there was a general feeling of uncertainty in the property market as experts, investors, landlords and even homeowners weighed in on what might happen. Yet, two years later, with the UK’s withdrawal just around the corner, there’s been very little detail on exactly how Brexit will affect areas such as taxation, investment and property prices. Despite the warnings, both the UK economy and property market have continued to grow to new heights. The national GDP grew by 1.8% in 2017 and property prices have risen around the country, particularly in regional cities.
So, looking back at the last 24 months, how exactly has Brexit affected the UK property market?
UK Property Market Remains Robust
The short answer is, the UK remains a popular destination for property investment. According to ONS figures, the UK experienced an annual rise of 4% in total investment in Q4 2017, equivalent to around £84 billion.
In positive news, the average house price recorded in the UK during 2018 was £226,906 – a 3.9% increase since 2017 figures and nearly 6.6% more since the EU referendum. While it’s true that these prices rises are lower than the rises before the referendum (in the two years prior to the vote, prices increased by 10.9%), it still represents positive growth in the right direction, perhaps just not as accelerated.
As with all things Brexit, the overarching theme is one of uncertainty. It’s such an unprecedented event that trying to predict the future and thus the market is futile. However, going from market trends, we can see that Brexit hasn’t been a disaster for the property market that some were predicting. Supply is still woefully below demand and, Brexit or not, the UK still needs 240,000 new homes p.a to meet demand.
Property also remains a long game. As an asset, property best fits a long-term strategy and offers the best returns over time, which fits in with the general consensus that markets will stabilise after Brexit.
The other solid fact is that while London is declining, regional cities are on the rise. The capital is the only city that has witnessed a decline in prices over the last year, the first time since 2009. Regional cities, on the other hand, are experiencing something of a renaissance. Regions such as Birmingham, Manchester, Liverpool and Edinburgh are leading the way, experiencing growth between 5% and 8% each year according to Hometrack.
It’s important to consider that the effects of Brexit may not be felt until the near future and beyond. Oliver Knight, an associate at Knight Frank, believes that this unclear future is having the biggest effect on holding growth back, perhaps suggesting a surge may be around the corner.
“There is a lot of uncertainty in the market as to where we are with Brexit… That has really kept a lid on further growth. There is a wait-and-see attitude.”
Chesterton’s believe that the overall economy will determine the way that the UK property market will move. They also believe that after the turbulence settles, economic growth will quickly resume. In terms of foreign investment, they say:
“There is no sign to date that foreign property investors will suddenly desert either London or the UK post-Brexit. There is every reason to believe that the flow of oversaes money will continue to increase.”
Of all the asset classes in the UK, property has remained popular. Reinforcing the old saying “safe as houses”, 63% of respondents to a recent Market Financial Solutions (MFS) investor survey regard property as a ‘secure asset’, with 18% of investors still considering investing over the next year.
The Future of the UK Property Market
Looking forward, there is no sign that people will stop investing in the UK property market. Market demand is continuing to skyrocket in certain areas, heavily outweighing the available supply. This is coupled with the rising popularity of city centre living, especially in affordable regional cores that are pushing massive redevelopment.
Property also remains a relatively secure investment with stable returns. The investment community is clearly positive about future prospects in the market, even with the uncertainty that the change brings.
One thing that’s clear is that more stock is necessary. As Brexit draws closer, demand for a secure investment asset increases, especially something such as property which can weather periods of economic change. This is particularly obvious in the MSF survey which shows that over half (53%) of investors are planning to invest in a traditional asset such as property during 2018, eschewing other asset types such as cryptocurrency.
All of this supports the view that property can often be a rewarding investment as long as its given the time to provide returns, even despite external factors such as Brexit.
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