There is no doubt that from a political point of view Brexit has been horrendously mismanaged. We are now more than three years after the referendum. However, amidst all the worry regarding Brexit, the economy and the impact on employment numbers, why are house prices not reflecting these concerns?
Follow the money
There is a saying in the world of investment “follow the money” which effectively means that the direction of cold hard cash speaks volumes compared with media bluster. So, let’s take a look at some of the factors to consider:-
- The UK economy is still growing albeit growth has slowed
- Official employment numbers are near record highs
- House prices are still rising albeit at a slower rate
- Rents are still increasing as demand continues to rise
- Immigration numbers are still rising
This does not look like a country/economy on the verge of a collapse? This looks like a period of reflection during which the make-up of the UK economy and trading relationships around the world will likely change significantly. Dare we say it; are there signs of a strong backbone to the UK economy and more importantly the UK property market?
Removing all emotion
If like many, you wake up in the morning to review the latest news on Brexit, it will depend which newspaper you read and which website you visit. We see very positive developments quickly spun into negative connotations which can impact the mood of millions of people. So, where can you look to get a real feel for what’s happening with Brexit and more importantly what national and international investors think will happen?
We are talking about stock markets, currency markets and property markets. The fact is that despite three years of doom and gloom, with the UK media taking a very negative stance on Brexit, stock markets have performed admirably and despite the threat of talking ourselves into a self-fulfilling prophecy, property prices have held up very well. The fact that we are talking about reduced growth rates across the UK property market, with the exception of London, reiterates this situation. However, very often we see the mass media spin a slowing growth rate in UK property prices to suit their own agenda.
UK property market
In reality there is something of a stand-off between sellers, unwilling to “give away their properties”, and investors looking for a “bargain”. The fact we have seen a reduction in transaction numbers highlights this situation perfectly. However, it also ensures that those properties on the market attract sufficient competition to maintain or even push prices ahead.
If we look at any market in the world, investment, retail or anything else, when we strip away everything it comes down to supply and demand. So, the situation in the UK property market is clear:-
- First-time buyers are struggling to climb onto the property ladder
- Demand for private rental properties is increasing
- Social housing is in short supply
- Private property rents are rising
- The UK population is growing
- Chronic underinvestment in newbuilds is still a problem
All of these are positive indicators for the UK property market and even tax rises and increased regulations are having a limited impact. When we sit down and look at the situation in the cold light of day there are many factors to consider:-
- The UK will agree a trading arrangement with the EU in the end
- The ability to trade with international partners will grow the UK economy
- The UK will maintain net immigration leading to increased demand for homes
- Low interest rates make rental yields even more attractive to investors
- Low finance costs are a bonus for long-term investors
If the UK stock-market started to collapse and every other day saw a major company issuing a profits warning then there may be reasons to be concerned. However, at this moment in time, despite misleading press comments, there is not a huge outflow of capital from the UK. International property investors have been scouring the UK for bargains, the London market is showing signs of recovery and UK property prices are still rising.
The first indications of concerns regarding Brexit and the future of the UK will emerge in the money/investment markets. After all, these are information exchanges where deals are carried out with no emotion, no loyalty and no thought for the consequences. At the moment they are showing no real concerns…..