Article 50: investors wait as Brexit triggered
As Article 50 triggers this week investors are holding their breaths.
The financial impact of the UK leaving the EU are so far clear, a concern to UK property investors waiting to discover whether existing UK property investments will bear fruit, or whether to enter an uncertain property market.
So far, the referendum result seems to have been a factor in the drop in numbers of people moving house. In the second half of 2016 UK housing transactions were down 9% over the same period in 2015, according to numbers from HM Revenue & Customs. Estate agency group Countrywide adds that the vote also impacted confidence in the property market.
As far as pricing goes, the main effect of the vote has been seen in London: where there was previously a boom, there is now a definite dip, with growth at its lowest level in four years. Other UK cities like Manchester and Bristol have picked up the mantle of fastest-growing price leaders.
However, potential buyers waiting for lower London prices have been left disappointed: growth continues at a rate of around 5.6%
So what’s in store for UK property for the rest of the year and beyond, following Brexit?
The director of residential research at Savills says everything depends on upcoming negotiations.
“If the EU is open to constructive negotiations, the impact on sentiment will be limited to mild caution, whereas a more combative stance risks restricting activity to buyers and sellers who really need to move,” Lucian Cook says.
Cook believes London property buyers will be more cautious, simply because buying a home in London represents such a large investment. This phenomenon means prices in London will “pretty much flat line for a couple of years,” he says.
In the wider economy, inflation will be a key concern. A drop in the value of the pound means we’re already seeing signs of higher inflation and weaker consumer activity. If this happens, we’ll see weaker property price growth, and possibly even small falls, along with lower numbers of property transactions, especially in expensive London.
With rising prices for basic goods, people might decide to stay put and renovate rather than move home.
As for the mortgage market, so far, it’s not been affected. Competitive rates mean mortgages are still attractive for the buyers who are still buying.
One factor that could bring about significant change in the property market would be a rise in base rates. If the Bank of England raised its rate from 0.25% to 0.5%, confidence would be affected.