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Comment: What might Brexit mean for property investors?

Since the UK voted to leave the European Union in June 2016, speculation has been rife that the property market will suffer as a result. However, the threat of economic uncertainty is nothing new and many are confident in the market’s ability to weather this storm.

A turbulent history

Economic hardship has been a staple of the UK’s post-war history. The 1970s saw our first ‘double dip’ recession as a result of increasing oil prices, while the 1980s brought about rapidly increasing inflation and manufacturing troubles.

In 1989, the Bank of England’s base rate increased from 7.88 per cent to 14.88 per cent in the space of less than 18 months, resulting in a record number of home repossessions in the following years. More recently, in September 2007, the collapse of Northern Rock resulted in the country’s second recession.

However, despite all of the above, in most cases the effect on the UK property market was relatively short-lived.

While it is of course important that we evaluate what Brexit may mean for property investors, we must consider it within the context of such previous periods of economic difficulty in order to put it into perspective.

Positive signs

The general perception of the UK is that we are a nation of owner-occupiers. However, the reality is that we actually have the fourth lowest ownership levels in Europe. As such, any post-Brexit impact on the cost of renting and the ability to get on the property ladder will be important to many.

Data following the 2016 referendum suggests that average national house values have increased – albeit at a slower rate than in previous years. According to Halifax, average values increased by around 10 per cent to £236,800 in February 2019, compared with £214,115 in May 2016.

A north-south divide?

From a regional perspective the north-south divide still exists but appears to have reversed, with the South seeing slowing levels of growth and an actual reduction in property values in London. Given the South has historically boasted the highest property prices and fastest year-on-year growth, in more turbulent times it is no surprise that they have felt the impact more acutely.

ONS figures from February 2019 illustrate that in the year to December 2018 all of the UK’s southerly regions reported growth, apart from the City of London itself.

While the longer term impact of the vote is yet unknown, considering London reported a 9.2 per cent drop pre-referendum, the South still seems to be holding firm for now.

Elsewhere, year-end figures for the West Midlands were positive, with the region reporting the highest annual increase (5.2 per cent), followed by the East Midlands and Yorkshire, both at 4.2 per cent. When compared to pre-referendum valuations this highlights a slight reduction from 7 per cent in the West Midlands and 8 per cent in the East Midlands, but only a 0.2 per cent drop from 4.2 per cent in Yorkshire.

Overall, the figures suggest that despite Brexit uncertainty, the Midlands and the North remain in positive territory.

Weathering the storm

With the above in mind, it is difficult to support the bleak picture some have painted of the UK property market post-Brexit.

At a national level we have seen a 10 per cent increase in property values since May 2016 and house prices have continued to rise across most regions.

Thus far the property market has stood firm against potential Brexit headwinds. However, the potential long-term impacts remain unknown and will be largely dependent on the deal, if any, we are able to strike with our European neighbours.

As such, we are advising clients invested in property to consider the following areas to ensure they are best prepared for any potential Brexit scenario. Within this context we can support clients by providing flexible mortgages, loans or overdrafts to help buy, remortgage and improve residential property.

  • Understand your financial landscape – look at the source of your income and any alternative sources that may exist
  • Understand your personal wealth balance sheet – review your property and investable assets and how these can be used within any borrowing solution
  • Understand yourself – focus on how your family can support the next generation whilst preserving its wealth for future years.

Ultimately, while Brexit may present potential headwinds for the UK property market in the longer term, with a history of weathering economic storms we are confident in its ability to come out sailing on the other side of this Brex-storm.

Daniel Porteous is client manager at Brown Shipley



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