British Homes & Brexit
With so many conflicting opinions, scaremongering and speeches from politicians who have not only changed their views but seem to have turned this into a leadership election we thought some facts and opinions on what may happen to the property market would help, so we want to tell you what the property experts are saying.
On Thursday 19th May 2016 NAEA (National Association of Estate Agents) and ARLA (Association of Residential Letting Agents) published a report in association with CEBR (Centre for Economics and Business Research). The report titled Brexit and the property market simply does what it says on the tin and looks at the effect a “Brexit” or “Bremain” result would have on the UK property market following the referendum on 23rd June.
It does make interesting reading we recommend you read it if you think that your decision will be based on how it will effect property.
Here are the key findings as listed on page 3 of the report, they are facts and therefore not emotionally charged. The rest of the report can be found here
• Savills, a real estate services provider, estimates that in 2013/14 68% of buyers in the prime London market were UK nationals. Out of all the prime sales to non-UK nationals in the year to June 2013, 16.5% were to nationals of European countries.
• Not all UK regions would be impacted equally following Brexit. London has by far the highest share of EU nationals and nearly all of the prime investment property is located in the capital.
• Based on the Office for National Statistics’ projections, under the low migration scenario (which becomes more likely following Brexit) the population of the UK would be smaller by 1.06 million people in 10 years compared to the principal forecast. Lower immigration would mean less people looking for accommodation which would reduce the demand for housing.
• Brexit would also impact the supply side of the property market. The construction sector is already facing skill shortages and 4.7% of the UK’s construction work force was born in another EU country.
• The UK’s membership in the EU gives the country status as a ‘gateway to Europe’. This has a direct impact on the property market: for commercial property, the substantial presence of foreign firms boosts demand. For residential property, demand is impacted by the large number of foreign staff that relocate to the UK as part of their firms’ involvement in the country.
• Should the UK remain in the EU we expect the average UK home to cost £303,000 by 2018. This compares to £290,800 in 2017 and £278,500 in 2016. Under the Brexit scenario we expect the average UK home price to stand at £277,600, £288,900 and £300,800 in 2016, 2017 and 2018 respectively.
• The cause behind the slower rate of growth in the event of a Brexit will be the London market as the capital’s safe haven status would be damaged and the decision to relocate by some foreign firms would dampen demand.
• Under the Bremain scenario we expect the average London house price to stand at £536,000, £564,500 and £599,200 in 2016, 2017 and 2018 respectively. Under the Brexit scenario we expect prices of £533,700, £559,300 and £591,700 respectively.
• When we consider these price differences alongside the total number of dwellings in London, the cumulative difference (or hypothetical loss) in property value reaches £8.2 billion in 2016, £18.3 billion in 2017 and £26.5 billion in 2018.
• The impact of Brexit on the rental market would be minimal in the first 2-3 years following the referendum. However, country-wide rents could be impacted more severely in the long term. UK residents born in other EU countries are far more likely to be private renters. Therefore if fewer EU nationals move to the UK in the long term there may be a more noticeable impact on demand levels.
Tim Foulkes, Senior Partner, said “Politics will always have an impact on the housing market and this referendum is no different. Unless you are thinking of investing in London then perhaps it is wise to ignore politicians and make your decision on where you next live by your needs; schools, children leaving home, partnering or marriage, births, jobs, change in income, relocation, retirement. After all life does go on. Politicians come and go.”