The general public has listened to both sides of the debate and decided that leaving the EU is the best route for the UK, its economy and its future.
What happens next for the UK property market?
Property investment volumes in the build up to the referendum slowed, as buyers awaited the result before purchasing. Transactions were 31% lower in the first quarter of 2016 compared with Q1 2015, mainly as a result of the uncertainty surrounding a potential Brexit. The fear of the unknown, combined with high property prices, has created pent up demand, ready to react to any correction in the market; but was there something else going on?
Many have predicted that a post-Brexit UK will see the value of sterling fall against other currencies. This would make the value of sterling assets, such as property, cheaper for overseas investors and institutions.
The combination of pent-up demand and falling sterling rates should provide the market with a post Brexit upturn in transactions. How long this lasts, however, is the key question, as the Government now faces the prospect of negotiating Britain’s exit, creating a period of uncertainty across the economy. In property however, uncertainty in the economy leads to volatility in the property market, which creates opportunities.
Property Investors, both domestic and international, will continue to view the UK Property Market as a “safe investment” for the long term, due to the UK’s limited supply and high demand; Brexit will not fundamentally change these underlying market factors. According to figures published by real estate service provider CBRE, prices are up 2,000 per cent since we entered the European Union in 1973 and up eight per cent now on their previous all-time high of 2007, the period before the financial crisis. Since the 1950s, successive governments have failed to oversee an adequate supply of house building versus demand. The shortage is about 100,000 homes each year.
Property investors looking to leverage should also benefit. The Bank of England's first instinct will be to protect the economy. It is hardly likely to increase the headline interest rate – unchanged since March 2009 – and could actually cut it. That will mean cheaper mortgages and lower costs for those on tracker deals. However, already high deposit thresholds for first-time buyers could rise further in the event of an economic slowdown. This, coupled with possible investor flight from London's inflated property market, could in theory to a dent in property prices, but the long term trends should not be ignored.
The UK property market is robust and whilst short term effects may be upwards as a result of further international investment, domestic buyers should also benefit through cheaper borrowing costs. The longer term effects of Brexit are highly reliant on the renegotiations with the EU, the global economy and macro-economic factors, a crystal ball no one has access too.