The UK property market is facing short term volatility due to the decision by the people to vote to leave the European Union, but over the long term experts predict it will settle down and still be attractive.
The main issues seem to revolve around how foreign buyers will react to the leave vote as there had already been signs of a wait and see attitude in terms of overseas investment in property in London in particular where demand and prices were showing signs of slowing.
There will be international buyers who may initially give the London market a wide berth, according to Edward Heaton, managing director of property buying and search agent Heaton & Partners.
But he pointed out that this could be short lived if the pound drops dramatically, as London will suddenly look much better value to foreign buyers. ‘There is a risk that with a period of uncertainty ahead of us, prices may drop off, but I believe that any fall will be limited and suggestions of a crash are overstated. The effect is most likely to be felt in London and the South East,’ he explained.
However, Ian Westerling, managing director of Humberts, believes that continued uncertainty during lengthy negotiations as politicians thrash out what post-Europe looks like for Britain is likely to keep the brakes on the property market for the foreseeable future.
He explained that people who have to move house will still do so but many investors and less committed buyers are likely to sit tight to see the economic and social impact of the referendum result.
‘Housing market professionals will need to brace themselves for a new norm in market dynamics, underpinned by the ongoing unknowns. The wait and see period could lead to some price adjustments. The onus will be on the Government to act swiftly to avoid the property market becoming paralysed which would have a knock-on impact on the rest of the economy,’ he said.
Adam Challis, head of residential research at JLL, also believes that the London housing market will feel the effects of the decision more deeply. ‘The interconnected trading relationship between London and the rest of Europe means the implications are more complex. This will exacerbate the uncertainty for London’s home owners,’ he said.
But he also pointed out that paradoxically, investors may well identify opportunities in this market over the short term, particularly international purchasers that can benefit from the currency arbitrage that has opened up by a weaker pound.
‘While the focus leading up to the Referendum has been on the UK’s international trading relationships, we are deeply concerned that domestic politics will now be the key risk to the housing market. The UK has a deep housing supply imbalance and concerted attention from politicians to deliver credible, lasting solutions to the supply conundrum is desperately needed. Protracted infighting within the UK’s political parties will only harm the UK economy and any chance of a timely recovery from the expected economic slowdown,’ he added.
But in reality, it is hard to know what the full ramifications will be, according to Mark Posniak, managing director of Dragonfly Property Finance. ‘How the Bank of England, the Government, the financial markets and economy react today and in the weeks and months ahead will be crucial to how the property market performs,’ he said.
‘Caution, reduced transaction levels and downward pressure on prices in the months ahead are almost certain but we should not write off the property market. Despite the magnitude of the result, the structural supply issue underpinning the UK’s property market may well prevent prices falling materially,’ he pointed out.
He also pointed out that overseas demand may increase on the back of the decimated Pound. ‘For many overseas investors, buying British property just got a lot cheaper,’ he added.
Some believe there won’t be much of an impact due to supply not keeping up with demand in the housing market.
‘We don’t anticipate any tangible difference where the UK property market is concerned and the supply and demand balance that is currently dangerously out of kilter will see little sign of stabilising itself,’ said Russell Quirk, chief executive officer of hybrid estate agent eMoov.
‘Property values increased by 6% over the course of 2015 and we predict the same rate of growth by the end of 2016. Home ownership will remain far out of reach for the average UK citizen and the overwhelming swell of demand for property will remain despite our choice to leave the EU,’ he explained.
Martin Walshe, head of residential at Cheffins, is also upbeat. ‘Both buyers and vendors waited to hear the referendum result, and now that we know we are leaving the EU, those who have sat on the fence will be returning to the market in their droves,’ he said.
‘Whilst we will probably experience a short period of adjustment, the UK property market is incredibly resilient and investment in housing will remain a cornerstone of our market, whether we are a part of Europe or not,’ he believes.
‘Residential markets have always been influenced by uncertainty and we are now entering an economic climate which has never been experienced before, so the only strategy is be back to business as usual and brace ourselves for the busy period which is to come,’ he added.
Janine Lewis, chief executive officer of InvestSure, also thinks there will not be a huge impact. ‘Today’s decision by Britain to leave the EU won’t meaningfully change the fundamentals of supply and demand. Nor will it make a real difference to the nature of the challenges the property market faces, or the solutions that are needed,’ she said.
‘British property will continue to be an attractive destination for foreign money. But we also still face a severe housing crisis, with England alone needing a minimum of 260,000 new homes a year to cope with rising demand. The UK property market can either succeed or fail both within and without the EU, it won’t make a difference,’ she added.
Martin Robinson, director of sales at Hunters Property Group, said that the full impact on the UK property market will be difficult to determine until the negotiations between the UK and EU are finalised.
‘We expect some clients to pause to familiarise themselves with this news, but in the past we have found the UK property market has been very resilient against changes in legislation. At the end of the day, bricks and mortar will always be a good investment option in the UK,’ he added.
• Property wire
