Effect of Brexit on UK property investment
With just 7 months until the UK officially leaves the EU, at 11pm (UTC) on 29 March 2019, there is concerns across the board with investors – particularly property investors. But how will Brexit actually affect property investment in the UK; will international buyers really be deterred; and what does it actually mean for those looking to invest in property in terms of house prices?
Apprehensions that Britain leaving the EU would lead to a crash in house prices were some of the first concerns to be made public in terms of property. However, these predictions that market values would drop haven’t been wholly true. While house growth has significantly slowed since the EU referendum in June 2016, there has still been an increase in property values across much of the UK – the average growth at 3% from 2017 – 2018 (Office for National Statistics). London is amongst one of the places to see a fall in property values since June 2016, with its annual growth rate falling from 12% to -0.4% which had a great impact on the final national average figures (Financial Times). Whilst Brexit has caused a slow down in the number of investors from within the UK and EU countries, the effect of Brexit on the value of the British pound has caused instead an increase in investment from wealthy overseas investors (The House Shop).
House sales were also cause for concern, however the south of England seems to be the only region suffering; between 2015 and 2017, London, the South East and the South West all saw falls of between 3 and 20% in the number of property sales, while the East Midlands, West Midlands, Yorkshire, the North West and the North East all saw an increase in property purchased between 1 and 5.5% (Financial Times). With these figures taken into consideration, it’s clear to see that the UK property market hasn’t crashed as predicted at the start of Brexit, but merely shifted in its focus, with the north of England becoming a much more desirable location. As well as sales, we also saw an increase in property values – in April this year house prices had risen to an average of £226,906 which is 3.9% higher than April 2017, and 6.6% higher than house prices just before the EU referendum (Lawyer Monthly).
Assumptions at the start of Brexit expected that the attractiveness of UK property for investors would decline, with anticipations that investors would turn to other EU countries in times of political change. This, however, hasn’t been the case, as while numbers of UK investors and EU investors have slowed, the UK has become a much more popular investment option for investors outside the EU (particularly those in the Gulf Coast).
A recent Office of National Statistics report showed that in Q4 2017 there had been an annual rise of property investment in the UK of 4% – that’s £84.1 billion of capital. “Part of the reason why prices are rising is due to investor demand for a secure asset. Traditionally, investors gravitate towards assets that are able to offer safe returns in times of economic and political transition” (Lawyer Monthly).
Brexit was predicted to bring uncertainty to the UK property market, and whilst it has seen changes over the past 2 years, it remains increasingly competitive. As a popular, safe and secure asset, property is one of the areas that Brexit doesn’t seem to have affected as much as previous predictions warned, and if UK developers and investors can adapt to the changed climate of the market it will continue to grow post-Brexit.