After much debate and speculation, history was made last week when the UK people voted to leave the European Union. This came as a shock to many people.
No one really knows what the full impact of this decision will be. Apart from the predicted immediate impact this had on the strength of the pound and the stock market, we may not see any significant changes for a few years whilst the details are worked out.
So what does this mean for the property market?
You could argue that the UK has suddenly become a more attractive place for foreign investors to purchase because they will get more for their money. However, it is important to remember the fundamentals of the UK property market which are that there is a shortage of supply. This is because we live on an island, with a limited amount of accommodation, and an increasing population. We simply do not have enough accommodation currently or the pipeline to satisfy demand growth, so over the long term values and rent are most likely to continue to rise.
Even if we immediately shut the borders and did not let anyone else into the UK, the number of households is still predicted to grow due to increasing birth rates,longer life expectancy and smaller household sizes. It is unlikely that EU workers who are living and renting in the UK will suddenly leave because they are here for a reason.
In terms of property prices, I am sure that there will be some sellers who will panic as they may believe the predictions by Zoopla (before the referendum) that property process would drop by 20% if we exit the EU. This means that due to the current uncertainty, I expect there could be a real opportunity to pick up property at great prices over the next few months. It could be a good time to buy as long as the property stack up, makes good cash flow now and you are prepared to hold for the long term. If there is a short term dip in prices (which I doubt) then flipping property may not be such a good strategy to follow.
The other major impact on the property market is the potential effect of rising interest rates. It was widely suggested that a vote to leave the EU would be bad for the economy. Whether this is correct or not, general consensus is that interest rates are most likely to remain low. With the Bank of England Base rate at the all time low of 0.5%, normal people with savings are becoming increasingly frustrated by the poor return on their money.
The positive side to this BREXIT news is that problems and uncertainty in the market create opportunities for those of us who are educated and ready to take action. I look forward to see what happens in the UK property market over the next few years. Exciting times.
Article by Simon Zutshi
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