To some, the Brexit vote was a kind of Armageddon –bringing turmoil onto British businesses- whilst others labelled it as Britain’s ‘independence day’ and saw the vote as representing a golden opportunity. While the long-term effects remain to be seen, we explore five short-term effects and predictions for the property market.
One: Prices set to fall outside of London, with optimism of increased foreign investment.
KPMG forecast prices could fall by 5% outside of London, while others have said that the slump in sales which the market witnessed ahead of the referendum would be likely to continue [1]. On the other hand, some estate agents were thrilled with the result, saying the immediate slump of the pound would bring in international buyers [1].
A recent drop in rates for buy-to-let mortgages [8] also presents a unqiue opportunity for investors looking to invest in more properties, allowing them to make their move and ride out the political and economic storm the Brexit vote has caused, before coming out strong when the waves settle.
Two: Rise in (Br)exit clauses leave investors pulling out of deals.
In the run up to the vote, luxury flat developers in London saw an increase in investors requesting Brexit clauses, allowing them to pull out of deals in the event of Britain voting leave [2]. David Humbles, the Managing Director of Two Fifty One development, confirmed a few purchasers decided not to continue their purchases [1].
Three: Surge of English buyers looking to buy in Scotland.
Scotland, a country which witnessed a majority of remain votes, can expect a potential surge of English buyers as property searches for Edinburgh were up 250% – especially with the prospect of another referendum as Nicola Sturgeon, First Minister of Scotland, fights to keep Scotland in the EU [3].
The First Minister has most recently threatened to block Brexit, though there are uncertainties whether this could impact the UK actually leaving [5].
Four: Recruitment will slow in estate agencies.
As the result of the referendum hits investors confidence, recruitment in agencies is likely to slow down – although it’s thought that this period of uncertainty affecting the property market will only be short-term [4].
Five: Good news for landlords…EPCs might be ditched and Right to Rent rules likely to be re-written.
Leaving the EU will mean the UK’s relationship with them will need to be renegotiated and legislation will need to be reviewed, kept, amended, or even abandoned completely. Energy Performance Certificates (EPCs), introduced as a consequence of European Directive 2002/91/EC, have been under the spotlight – being branded as “pieces of bureaucratic wastefulness” [6]. Since introduced, they’ve cost consumers over £800m [6].
The two immigration acts, with their Right to Rent provisions, will also be leading contenders to be rewritten [6].
So overall…
It’s difficult to say what could happen in the long-term as this is an unprecedented event in the UK – or for any country – so time will tell. Howsy’s CEO, Calum Brannan, and other sources remain optimistic for the property market – though for now, we predict house prices to fall, more foreign investment and a downward pressure on house prices. On rental properties, demand will fall as the market suffers a knee-jerk reaction to the Brexit vote, though prices should stay the same [7].
Sources
[1] https://www.theguardian.com/uk-news/2016/jun/25/homebuyers-wobble-in-wake-of-brexit-vote
[2] https://www.theguardian.com/money/2016/may/20/property-market-brexit-clause-buyers-scrap-deals
[3] http://www.dailyrecord.co.uk/news/politics/nicola-sturgeon-says-second-independence-8272030#orXoiJpmfYZ5RiB0.97
[4] http://www.propertyindustryeye.com/leave-vote-could-put-dampener-on-estate-agency-recruitment-in-short-term/
[5] http://www.telegraph.co.uk/news/2016/06/26/nicola-sturgeon-threatens-to-block-brexit-in-face-of-english-fur/
[6] http://www.propertyindustryeye.com/brexit-open-way-for-epcs-to-be-ditched-and-right-to-rent-rules-rewritten/
[7] http://www.homesandproperty.co.uk/property-news/brexit-latest-seven-ways-leaving-the-eu-will-affect-londons-property-market-a102361.html.
[8] http://www.thisismoney.co.uk/money/buytolet/article-3656147/Buy-let-mortgage-rates-fall-Brexit-fears-stamp-duty-hangover.html

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