How the Brexit effect is impacting on the UK property market
The Brexit effect has the potential to create opportunities for small businesses, but can the same be said for the UK property market? Ramifications have been visible across the sector since the referendum in 2016, and the short-to-mid-term forecasts appear to be on the bleak side.
While the UK property market, both domestic and commercial, experienced a dip after the Brexit vote, those in the industry remained hopeful as they quickly showed signs of recovery. Brexit is looming closer, and fears are resurfacing over its impact on the UK property market. Unsurprisingly, this concern is affecting buyers as many are considering delaying buying a home until after Brexit, while hesitation is also starting to become apparent amongst investors.
So, what does this mean for the UK property market? Even if there is a successful and favourable Brexit, many are asking how Britain’s property market will fare and which areas of the country are expected to see the biggest knock on effects.
Growth will fall over the next four years
According to Business Insider, during the last five years, the UK has seen a property price increase of 28% – a positive figure after the financial crash of 2008. While it’s expected that house prices throughout the country will continue to grow, the current rate is set to drop dramatically.
Predicted to plummet by 50%, experts are forecasting a 14.2% increase over the four years between 2018 and 2022. It’s believed that Brexit – combined with a rise in interest rates and mortgage restrictions – will be the biggest culprit of this stunted growth.
Perhaps, as expected, the market is predicted to experience the slowest level of growth in 2019 coinciding with concerns surrounding the economy and the impact this may have on household finances as Britain exits the EU.
The impact here could be two-fold. In the first instance, investors may begin to turn to more stable property markets overseas. In the second, a recent survey from the Telegraph highlighted that Brexit could also pose problems for businesses within the property industry due to low buyer confidence, potentially stalling buyers and challenging times ahead for estate agents.
The imminent London property crisis
London’s property market has long operated independent from the rest of the country, with prices and demand continuing to soar – this despite the fluctuations that have occurred across the rest of the UK. However, with Brexit months away, it appears that the London property bubble has burst, with property prices in the capital now falling at the fastest rate in the country.
In May of this year, the governor of the Bank of England, Mark Carney, revealed the UK’s current property crisis. As reported in the Evening Standard, since the referendum announcement in 2016, the average property price has fallen by £900. However, property value has decreased at a much faster rate in London, at around £3,500 (or 0.7%).
Looking at individual boroughs, the wealthiest areas experienced the biggest drops in value, with the City of London coming out at a colossal 13.1%. But what does this mean for the London property market and the sector as a whole?
As reported in The Guardian, these decreases in value have subsequently lead to a slower market and resulted in lower asking prices across the capital. This means that many luxury properties are now being listed with huge discounts – up to 20% in some cases.
Again, the most affluent boroughs have taken the brunt, with decreases of more than 10%. As of January this year, Victoria and St James’s had seen the largest reductions, with an average of 14.1%, followed by 12.1% in Knightsbridge. Unfortunately for property owners and investors, the uncertainty surrounding Brexit means these price drops appear set to continue.
The Brexit effect – potential for an investors market?
While the London property market had experienced slower growth in recent years – which may have contributed to the increase in stamp duty in 2015 that could have deterred investors overseas – Brexit is expected to continue to reduce both prices and demand.
Despite this uncertainty surrounding Brexit, with reduced growth and lower prices, we could experience a buyers’ market. Whether for first time buyers or for those interested in investing in property, it could prove to be a good time to buy. Knowing accurate valuations in today’s fast-moving market is easy thanks to real estate agents such as GVA Worldwide, whose expertise includes corporate acquisition and strategic review.
Elsewhere outside of London, the property market is precited to remain buoyant. As discussed, growth will in all likelihood, decline, but experts expect this to increase after 2020 when the Brexit effect has settled and the property market recovered.