Predictions of the property market post Brexit

Brexit’s impact on the property market has been a hot topic for homeowners and prospective buyers since the UK voted to leave last year. The current stagnant central London property market could be heading for a dramatic increase if Theresa May avoids a “cliff-edge” hard Brexit in 2019. Economists have predicted that the London’s property market will not shake off its slump until 2021, when it will return to being the fastest growing part of the UK.

Global auditor and service company KPMG have stated that uncertainty associated with the Brexit process, coupled with rising interest rates on the horizon, could trigger further adjustments in house prices and moderate growth in most regional markets over the short term. The after-effects of the changes made to stamp duty in 2016 are also likely to affect the growth in the market over the next couple of years. However, KPMG's projections suggest property prices will start to pick up by 2019, and London will be the driving force behind growth in the market by 2021.

Estimated Regional increase in average sales price:

Region 2016 2017 2018 2019 2020 2021 2022

London

 

7.9% 1.0% -1.0% 2.5% 3.9% 4.4% 4.9%

South East

 

9.1% 2.9% 0.5% 2.1% 3.3% 4.0% 4.6%

Yorkshire and The Humber

 

2.6% 1.3% 0.2% 1.9% 3.0% 3.7% 4.2%

North West

 

2.6% 3.7% 2.6% 3.0% 3.3% 3.5% 4.0%

North East

 

-0.6% 0.8% 0.4% 0.8% 2.0% 3.0% 3.8%

South West

 

5.1% 4.4% 3.3% 4.4% 4.3% 3.7% 3.7%

East of England

 

7.2% 4.0% 3.4% 4.5% 4.1% 3.3% 3.3%

Wales

 

1.1% 1.6% 2.8% 3.0% 2.5% 2.5% 3.2%

East Midlands

 

4.1% 4.3% 3.6% 3.8% 3.3% 2.9% 2.8%

West Midlands

 

4.5% 4.1% 2.8% 2.9% 2.7% 2.4% 2.5%

Scotland

 

1.1% 1.9% 1.5% 1.9% 1.8% 1.7% 2.2%

Northern Ireland

 

1.6% 3.0% 0.3% 0.2% 0.5% 0.8% 1.6%

(source: https://home.kpmg.com/uk/en/home/insights/2016/10/the-brexit-column.html)

If Brexit negotiations go according to plan where we result in a free-trade deal with Brussels and transitional arrangements are put in place to ‘minimise the potential business disruption’, UK house prices could surge by as much as 20 per cent in total by 2020 once the country’s future outside the European Union has been settled. Further rises are expected in the years to follow. This will recover all of the ground lost since the market peaked back in 2014. However, this price increase will not be seen until after Brexit negotiations are finalised.

Whilst it is an uncertain time, due to Britain’s reputation of being a stable country with a good economy and political system, businesses are still eager to trade in the UK. International businesses such as Siemens and Toyota have confirmed that they do not intend on leaving the UK following the Brexit decision, and many other large corporations and banks have also confirmed that their headquarters will remain in the UK. Once agreements have been met, Britain will have free reign to trade with other countries, without having to comply with the EU’s framework. This will allow Britain to reach more favourable trade deals and thus will provide a more attractive environment for business.

Clearly, large investors have not been swayed by Britain’s decision to leave the EU and have continued to buy up property. In the first half of 2017 alone, £5 billion in Chinese capital was sunk into Britain’s capital city. One of the most famous examples of the trend is London's most expensive building, the “Walkie Talkie”, which has recently been obtained by an investor from Hong Kong, for a substantial £1.3 billion price-tag. The low pound continues to make the present financial hub of Europe an attractive prospect, despite an uncertain future for links with the continent.

There’s one simple factor that, almost automatically, makes Brexit seem less important - the growing gap between supply and demand. It has been estimated that the UK needs to build over 174,000 new homes every year to balance out the demand. However, Britain is far from reaching this target. Theresa May has announced recently that a £2 billion injection could fund 25,000 homes for social rented market. The government further stated the £2 billion it was making available would unlock a further £3bn in public and private investment in all types of housing.

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