BREXIT – What Effect Could It Have On The UK Property Market?

With the referendum just around the corner speculation is rife as to the effect a vote to leave the EU could have on the UK property market.  In reality no one has the answer and the speculation is largely based on ifs and buts, with individual viewpoints on the potential consequences being largely based on which side of the fence you sit.

George Osborne, in a recent television interview said that the UK’s property market would take a “significant hit” if the public voted to opt out of the EU in the referendum on 23rd June.  In contrast, Michael Gove - Justice Secretary, believes “voting leave will give us back control of the UK property market”.

But what are the campaigns for both sides saying will happen?

HOUSE PRICES

The Stay Campaign:-

• The Chancellor told the BBC in a recent interview that he expects house prices to drop by up to 18% less than their current value by the year 2018. Homeowners with mortgages could therefore find themselves in negative equity and, if forced to sell, would have to do so at a loss.

• Non-homeowners may struggle to get on the property ladder if there is an increase in mortgage rates, or should mortgage conditions tighten due to increased risk and poorer economic conditions.

The Brexit Campaign:-

• One of the biggest impacts on house prices is the demand for housing, with the ability to control our borders we can release the pressure on the housing market.

• A drop in house prices would bring properties back to a more affordable level. Non-homeowners would no doubt welcome an 18% fall in house prices.

INVESTMENT

The Stay Campaign: -

• Investors could see the value of their assets drop and be forced to sit tight and risk a further drop, or sell at a decreased value. For foreign investors Brexit could put an end to free-moving capital and could cause the end of the “safe-haven” protection afforded, leading them to sell up and buy property elsewhere in the EU.

• It is anticipated that the London property market would be hit the hardest, where to date foreign investors have boosted the market with purchases, seeing London as a “safe bet”. It is likely those potential buyers will now want to monitor the market before committing.  Research earlier this year by global property adviser, CBRE, found that nearly three out of four property investors think Brexit would make the UK a worse place to invest.

The Brexit Campaign:-

• A weaker sterling may attract more investment in the London Property market, as the relative strength of the pound in the past has made property investment less attractive to some foreign investors. The Government may look at making the process of investing from abroad easier in order to attract further economic investment.

• Restrictions may be put in place that would make it more difficult for UK residents to invest aboard encouraging them to invest in the UK.

HOUSE BUILDING

The Stay Campaign:-

• We could see a drop in housebuilding if skilled European workers lose their right to work and are forced to leave the UK.

• Construction costs may increase as the freedom of movement of goods and services is withdrawn or limited.

 The Brexit Campaign:-

• If we were no longer required to make financial contributions to the EU that extra cash could be put towards boosting our own infrastructure and development.
• Not being under EU jurisdiction might allow more planning freedoms and the ability to open up formerly rejected applications.

Although both campaigns have differing views on what will happen to the property market there is one thing that is undeniable and that is uncertainty!  Whatever the outcome and uncertainty Dean Wilson are happy to chat through the issues and assist with all property queries.