Residential Market Post Brexit

 

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It is now over four months since the Brexit vote and there are no real indicators as to what the short-term future holds for residential developers and the extent of regional variations.

There were various changes in the market before Brexit including an increase in stamp duty and the changes in the tax regime with regards to the interest cost of rental properties which would justifiably have reduced demand and lead to a reduction in the increase of property prices.

The uncertainty that the country now faces in the delivery of the Brexit result could impact property prices with London particularly susceptible to any perceived or real change in status as a leading world city and financial services centre.

In recent months since Brexit the values of prime high-value stock has declined by up to 8% in Central London – mid value stock has flat lined showing no increase while lower value stock has shown modest growth.

This has not had much affect yet as most properties being delivered since Brexit were pre-sold, however, reports from all the major house builder are bullish about current sales and forecasts for the next twelve months.

The consensus appears to be that the residential market was due a correction before Brexit and that any correction will not be attributable to Brexit alone. The already mentioned adverse tax and stamp duty changes together with constantly increasing prices over the previous five years had to end at some point. Some commentators have likened the current climate to the 2002-2004 era where we saw a relatively soft landing with property prices reducing by a maximum of 10%.

As in any market there are opportunities with the weakness of Sterling making investment in residential properties within the UK an attractive proposition for overseas investors. The continuing low interest rates present an opportunity for domestic buyers to trade up or become first time property owners.

The domestic market is subject to the ongoing availability of reasonably priced mortgages and the ability of first time house buyers to accumulate a deposit to continue to show stability and maybe some modest growth.

In conclusion, there is still strong domestic demand however this may be affected by affordability issues, UK property is still attractive to foreign investors as long as London retains its world and financial status and in an ideal world schemes to assist first time buyers are increased.

In essence, Brexit has increased uncertainty in the residential market which has increased the risk but also the opportunities.