Prime Centrum Blog

Brexit – What next for the UK Property Investment Market?

June 27, 2016

Published by: Izzet Olcusenler

Brexit – What next for the UK Property Investment Market?

The UK public narrowly voted in favour of leaving the EU and there has been a lot of speculation and scaremongering in the media. As the UK and the world take time to reflect we believe there are many reasons to be positive about the outcome from the vote on 23rd June.

What does the result of the EU Referendum mean for the UK property market?

There will be short-term uncertainty but we remain very confident in the long-term growth of the UK property investment market. The case for UK property is underpinned by a number of factors that will not change as a result of the UK leaving the EU.

UK buyers drive property demand and home owners are responsible for the majority of purchases of UK property and these buyers will still be ready to purchase over the medium and long term, especially given interest rates that are likely to remain low as the Bank of England focuses on maintaining stability.

Furthermore the overall lack of supply of property remains a fundamental factor that shows no sign of abating for many years and certainly this will not change whether the UK is in or out of the EU. It is worth noting that after the Financial Crisis UK property performed better than UK shares indices and many residential property owners will be unwilling to sell during a period of uncertainty – further exacerbating the supply of property.

Demand for property investment in regional cities such as Liverpool will continue to grow once the initial reaction of this result is over. Property in cities like Liverpool still boast excellent investment credentials with the core fundamentals of a lack of available quality accommodation in the city centre, and a rental market boosted by a growing population of young professionals aspiring to city centre living, is here to stay.

UK Sterling Volatility and Recovery

The short-term turbulence will present an opportunity – with a weaker Sterling providing a chance for overseas investors to purchase very competitively priced property in the UK.

The UK pound fell to a 30 year low on the back end of the Brexit vote. The depreciation has been caused for various reasons including the uncertainty of the UK and EU trade relations and how the UK Economy will grow moving forward.

An assured address by the Governor of the Bank of England, Mark Carney has appeared to settle the nerves and markets have realised the effects are not long lasting. He says we should expect volatility, but the Bank of England is well prepared for Brexit having put in place “extensive planning.” The Bank will “not hesitate to take additional measures” and has £250 billion of additional funds is available to markets. UK financial system is strong, capital requirements of banks are ten times higher than at time of financial crisis.

What now for the pound and investor markets?

The currency markets will start to recover again in the short to medium term, an amicable divorce with a continued British membership in the single market is the more likely scenario.

The clearer the next steps become, the faster the currency will recover. It is now a time of opportunity for all overseas investors to capitalise on this situation and acquire key UK property at competitive rates whilst the current exchange rate is at a historic low.

Roadmap for the UK economy and likely relationship with the EU

The EU Referendum was fundamentally a vote to leave a political and regulatory system and not to suspend relations and trade with the EU Single Market – the major EU economies such as Germany and France rely on exporting to the UK’s huge consumer base for example.

It is inevitable that the UK will negotiate their continuity of trade with the single market and maintain all existing trade relations with the EU as any other scenario would have adverse effects on both the EU members and UK. Wealthy countries such as Switzerland and Norway already operate in this way.

Continuity and stability of the UK economy

The UK economy is one of the most stable and established in the world and certainly in the years since the last recession one of the fastest growing economies in Europe. It goes without saying that there will be a period of uncertainty, reflection and adjustment following the result of the EU referendum, as the Government and EU begin mapping out the action plan.

It must be stated that despite this uncertainty and investment market reaction it is very much business as usual. The UK will continue to grow, whether part of the EU or not – it is the country’s long established infrastructure and worldwide influence, powerful financial industry, services sector, along with both a well skilled and hardworking workforce and entrepreneurial spirit that will maintain the UK’s major role as both a trade partner and destination for investment.

It may take a short time for investors to regain confidence, but we believe in the resilience and strength of the UK economy and property investment market in the in the medium to long term and the UK will remain one of the world’s strongest and most secure economies in which to invest.


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