Across the media all possible scenarios have been played out from predictions of a property market dip and the central London bubble bursting, through to a huge boom as houses become cheaper. Calls have even been made for a second referendum and for London to gain independence from the UK. In reality though no one can predict how long it is going to take to negotiate our position with the EU, but as the dust settles and there is more direction as to who will lead the country the initial panic and insecurity about the future seems to be subsiding.
Uncertainty is the most dangerous threat to the property market; what we need now is a level head. Right now, the only way to gauge the market is to focus on the fundamentals. To help build stability, we need to look forward rather than reminisce. Already, HSBC and Goldman Sachs have confirmed they have no plans to move their headquarters out of London, and we can expect more banks to follow suit. Once things settle over the next year, we expect the outcome will be considerably more positive than we all originally thought – we must not let this shock ‘freeze’ us into inaction.
Regardless of the wider political situation, ultimately life goes on and people still need a home. Fundamentally there is more demand than supply in the property market and this won’t change any time soon, because it is difficult to build in London. The pressure on interest rates is now for them to go down therefore putting your plans to sell or buy on hold and playing the waiting game is unlikely to make a difference. Property in the UK is still driven by an owner occupier demand.
The question of ‘what next?’ for immigration is as yet unknown, and some have advised, uninformed, that EU nationals should hold off on making any property transactions. But if some EU citizens end up relocating, with strong rental growth their property would still be a good investment. There is huge rental demand across London and there will continue to be. Despite Brexit, people still need homes to live in: in the event a family has to relocate, their home can be let out and the owners will get a good return.
One of the key concerns of the past weeks has been the amount of foreign investment we can expect to see in the UK in the future. Forecasts predict there may be a reluctance from wealthy investors to invest in British stock, but this is an unlikely scenario. Although investors are naturally more cautious now, deals are still going ahead especially as they are effectively cheaper now. In the last weeks alone we have witnessed an increase in enquiries from foreign buyers. From a cost perspective, for international investors with favourable exchange rates now is the time to buy in London if ever there was one.
The only immediate effects we are likely to see as a direct result of Brexit are rents and property value experiencing a slight short-term dip primarily due to the additional short term supply in rental property caused by the stamp duty deadline at the end of March. The fundamental structure of the property market in London has not, and is unlikely to, change.
Both prices and the market will remain stable. The Office for National Statistics predicts nearly 10 million people will be living in London by 2024 and given past growth figures even if the rate of growth slows, there will still be a significant shortfall in housing stock.
Whether you’re a landlord, buyer or seller our advice is to focus on the fundamentals and don’t let your plans be thrown off course by the current political situation.