When the initial referendum on whether or not the United Kingdom should leave the European Union was held in June of 2016 the property market in the U.K. seemed to undergo a crisis of self confidence. There were many investors who wondered whether Brexit – as it came to be known would cause harm to property values on the back of increased red tape and barriers to entry for investors from mainland Europe and further abroad. There can be no argument that the ‘Yes’ vote did affect property prices. Property prices did fall in the period after the referendum – however the effect was relatively short lived. In fact many property investment pundits were of the opinion that it was not the prospect of leaving the EU that dampened property prices – but rather the uncertainty surrounding the process and the eventual relationship that the U.K. would have with mainland Europe. As talks around Brexit continue – it seems without end, a sense of uncertainty seems to be creeping back into the property market. Pundits believe that a ‘hard’ Brexit would cause investment volumes top fall by just over 10% and capital values to fall by an average of around 5% per annum over the next three years (in London at least). The market has shrugged off worse – albeit sometimes slowly.
However, is the current downward trend in property values the result of Brexit uncertainty – or is there something else at work in the U.K.property market?
If we examine the current situation should Brexit’s impact on property investment in the U.K. be seen as the prime driving force behind property value or is it simply one factor in a complex market? The consensus among property analysts is that although Brexit is playing its part in driving value downwards it may very well be that the current dip in property values in London for instance are the result of well established property value cycles in the city – and London may beat the tail end of such a cycle.
The same analysts who are convinced that a slight downturn in value due to the Brexit deal is inevitable are also convinced that the downturn will be short term. Once again returning to London which remains the UK’s prime property investment destination it is clear that the resilience of the property prices in the city are driven by a fairly constant demand from individual and institutional investors across the globe – including those from Asia and the United States. Many of these investors are also casting their eye to regional cities other than the capital where exceptional value can be had. The fact that the pound is expected to weaken further on the back of Brexit only makes the property in the United Kingdom that much ore attractive to savvy investors.
The robust nature of the British property market will mean that in all probability Brexits impact on property investment in the U.K. will be of a short to medium term nature. The resilience of the U.K. property market has meant that it can weather economic storms with aplomb – and there is no reason to think that the clouds over the market brought about by Brexit will not clear soon.