comment 19 The Brexit effect, six months on
Rick Nicholls, managing director of Bastien Jack Group Ltd discusses the current state of play on Brexit for property investors and developers.
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ince the initial decline in markets following the UK’s decision to leave the EU there has been some indication that stability is return-
ing, though GBP to USD and Euro are still trading lower. The vote for Brexit probably doesn’t mean that
the housing market in the UK is about to collapse either. While some uncertainty in the short term may reduce house price growth, for the longer- term property investor, this could be a good opportunity. At the time of writing, the pound is worth
€1.19. This means European property investors have more sterling to spend. Demand for property, specifically in London from foreign investors, is still likely to increase. Interest from China and Asia has been high as their currency exchange has automatically allowed them a discount on current prices. This is however, likely to be a short window of opportunity as we see markets recover from the initial shock. There is concern that demand for housing will
fall in London and the UK. However, parliamentary research produced for the 2015
Parliament put demand at between 232,000 to 300,000 new housing units per year through to 2020. Demand for new homes is exceeding supply by around 150,000 every year. This demand, fed by the number of new households created each year, is unlikely to fall below the level of supply. One of the main negotiations the UK and EU
will have to discuss is the free movement of people. Despite the ‘Leave’ campaign suggesting a limit to immigration, we now understand there needs to be movement, but objective negotiations will have to take place. This will form a significant part of the negotiations to leave the EU. The uncertainty of the exact outcome of Brexit may cause the average property investor a little nervousness, but the fundamentals for UK property remain strong. In terms of capital growth, there are a number
of comparable data measures, but the Real House price tracker provides a more meaningful guide to house prices and has been adjusted for the effects of inflation over the same period. Results confirm the increases in house prices have risen faster than inflation, and includes the last
recession – where the fall can be seen as a correction when compared to the overall property performance. Annual rent rises have accelerated in recent
years in both London and the rest of the country. Rents in London have continued to rise with greater pace than other areas in the UK, but have slowed since 2014, narrowing the rent inflation gap between London and the rest of the UK. In the UK, mortgage approvals by the
main banks increased in September after a 19-month low in August. They were lower than the year before, but speaking with our local agents, they suggest it’s down to a lack of supply of new build property rather than purchasing confidence. Speaking with agents in our pipeline areas,
they have confirmed confidence is still strong and enthusiastic house views are still going ahead. As long as lending is still being offered and liquidity remains within the economy, there is still a great opportunity ahead for the sector to progress.
Enq. 174 respond online at
www.hbdonline.co.uk
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