Brexit Fallout Affecting London Property Prices
In a week when the EU referendum has been unceremoniously thrust back into the limelight, with Michael Barnier, the European Union’s chief Brexit negotiator reiterating his stance that ‘the clock is ticking’ and that convincing the EU to extend the Article 50 deadline beyond 29th March 2019 seems as unfeasible as it does necessary, different sectors across the UK have been forced to consider the implications of another Brexit fallout, including property consultants in London.
So what does this mean for the property sector in London? Are we on the cusp of adownturn comparable to the 2008 financial crash? Let’s have a look.
A Reuters poll in June of asked 30 housing market specialists what they believed to be the true state of the property market. Findings suggested that rather than the forecasted property price growth rise of 2.5% nationally this year, it was more likely that property prices will rise a more conservative 1.7% nationally.
London, where foreign investment has long-fuelled skyrocketing property prices, is expected to experience a modest 1% fall over the course of 2018. If realised, thiswould represent the first annual decline in property price growth for more than a decade.
However, despite the, somewhat, pessimistic property price growth forecast, let us not forget that this hardly represents a significant decline. If anything, this decline is indicative of a more competitive London property market – something that may prove highly-attractive to long-term investors.
Since Britain voted to leave the European Union almost two years ago, Sterling GBP has performed around 10% worse against the dollar. This has made property investment in London – and indeed throughout the UK – more attractive to overseas investors. However, it would be irresponsible not to say that the prolonged ambiguity of Brexit has made some investors wary.
However, despite the political uncertainty, leading UK housing specialists have expressed cautious optimism for the years ahead. Nationally, house prices are expected to increase by 2% nationally, and 0.5% in London.
Forecasts for 2020 are similarly optimistic. The Reuters poll found that many leading property experts believe that by 2020 London’s property market will be on an even par with the rest of the UK with property price rises expected to be 2% in the London and UK market.
It cannot be denied that ongoing Brexit negotiations have resulted in market uncertainty, but despite this many property professionals are remaining optimistic – especially as supply-demand pressures begin to bite.
The Pre-Post Brexit Landscape
As of today, there is still little clarity on how a post-Brexit Britain will operate. This had driven many leading London-based residential estate agents to reduce their operating margin forecast for 2018.
Many property consultants believe it is also entirely plausible that the property market will bounce back once Britain’s split from the EU has been finalised. Only time will tell to see how the property market in London will be affected. Indeed, we may have to wait until March 2019, or even later in the spring and summer to see the true effects. A pre-post Brexit property landscape is a conservative one, but there is no reason to suggest that Brexit will drastically affect the London property market.
It must not be forgotten that there are also additional factors to consider. These include changes to house sale and mortgage taxes. There is evidence to suggest that mortgage tax-relief for buy-to-let owners has affected the property market – something that, arguably, has had a greater impact on London’s property market than Brexit.
Are we on the cusp of a property downturn comparable to the 2008 financial crash? No, we’re not. The property market is hardly going into cardiac arrest, it’s just suffering from a case of the nerves. Market confidence can be easily and swiftly restored – something we expect to see in the coming months.
At Jane Wood & Associates, with over 17 years experience, we are a leading London property buying agent and property consultant and we are here to help. If you have any questions or queries, please contact the team at Jane Wood & Associates today by calling +44 (0)207 602 8779 or send us a message online