What could Brexit do to the property investment market?

If we had the definitive answer to that question then I’m sure we could all make a tidy profit but the fact is, nobody truly knows so all we can do is speculate. Here are some of the speculations that are circulating at the moment:

 

Interest rates – the IMF (International Monetary Fund) gloomily predict that interest rates will rise in the UK if we leave the EU but 65% of economists in recent Reuters poll reckon that the Bank of England will cut rates and potentially restart quantitative easing.

 

Construction – If investment levels drop in the UK as a result of Brexit then there are concerns that materials and labour costs will rise and that there could be a shortage of overseas construction workers.

 

International Investors – Will overseas investors be put off by UK property investment if there is a Brexit? Investment in London has been cautious since the EU Referendum was announced but the same hasn’t been true of cities such as Birmingham, Manchester, Liverpool, Leeds where overseas investment has actually gone up, despite the referendum. It would appear that price and potential yields are the main drivers and if sterling continues to drop as a result of Brexit, overseas investors may see that there are some bargains to be had.

 

House Prices – Predictably, the UK’s Chancellor of the Exchequer has warned that UK house prices could drop by over 10% if we leave the EU. If you’re a first-time buyer then this could actually be good news, making property more affordable.

 

Many believe that Osborne’s figures are misleading and that the effect of Brexit will have little impact. There will still be the same demand and supply issue and if we remain, that won’t improve any time soon.

 

Landlords – If a Brexit leads to lower immigration levels then in the long term, this could mean less people looking for accommodation and, as a result, lower rents.

 

Some Landlords may shift their attention from traditional buy-to-lets to student properties where there will be less impact.

 

Interesting times lie ahead for the property investment market so it’s going to be a case of watch this space to see what materialises.

14 June 2016
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