How Will Brexit Affect House Prices in 2019

How will Brexit Affect UK Property Investment

On June 23rd 2016, the UK public voted to leave the European Union. An outcome few predicted, and the impact of this was felt instantly with the Prime Minister (David Cameron) resigning the following morning, which unsurprisingly caused a drastic downturn in the financial markets.

Fast forward a few weeks, and although the Pound Sterling was still relatively weak, the economy itself had rallied around and bounced back somewhat (https://www.finder.com/uk/brexit-pound), with many business leaders proving headstrong amongst the fears of an impending ‘financial crash’.(https://www.ft.com/content/90994db0-3eff-11e8-b7e0-52972418fec4)

A little over 2 years later and this ‘financial crash’ that the skeptics have been talking about constantly has yet to arrive. Even in the midst of the occasional distrust and low level of confidence in the financial markets, the UK is STILL seen as somewhere ‘safe’ for many investors to park their funds (https://www.economist.com/britain/2018/04/07/why-foreign-investment-into-britain-remains-so-strong). Despite any uncertainty, the UK economy has continued to rise – National GDP grew by 1.8% in 2017, 0.3% higher than what was forecasted. (ONS or if we need a link – https://www.bbc.co.uk/news/business-43154467)

In addition, the UK property market continues to perform well. One of the reasons for this is that weak pound is making it an even more attractive investment location for many foreign investors, with some currencies up 20-30% on the pre-Brexit foreign exchange rates, essentially giving those investors 20-30% more buying power. (https://www.economicshelp.org/blog/1882/economics/winners-and-losers-from-weak-pound/)

There were of course concerns post Brexit announcement about the attractiveness of property as an asset class, however we have in fact seen a rise of 4%, equivalent to over £84bn being invested into the UK’s property development sector, and in April 2018, average house prices in the UK had increases by 3.9% on the previous years figures and 6.6% since the UK public voted to leave the EU. (https://www.ft.com/content/d1f155f2-3683-11e8-8b98-2f31af407cc8)

One of the reasons for this continued growth in property prices, and the level of inward investment, is down to one simple metric: Supply and Demand. The UK has a colossal shortage of properties, and each year falls well short of the target of 250,000+ new homes. Regardless of Brexit, the pressure on housing will continue to rise.  The elderly generation are living longer, with more people remaining in their homes rather than going into care homes, and there is a rising young population looking to move out of their family dwelling – either as a first time buyer or renter. All of these factors put more pressure on the property market, which in turn forces prices (and rents) upwards.

Even in regions like London where some areas have had ‘price drops’, the fall in sale prices is less than 2%. It is only the top end of the market (£1m+ homes) that are feeling the pinch, this is not due to Brexit, this is simply a correction in an overly inflated London property market where prices were rising faster than salaries.  (https://www.homesandproperty.co.uk/property-news/london-house-prices-falling-at-fastest-rate-in-almost-a-decade-but-theyre-still-50-per-cent-higher-a121716.html)

Areas like Manchester and Liverpool are still receiving billions of pounds of inward investment which is great for the local economy in those areas, and creating plenty of jobs (over 100,000 over the next decade – http://www.neweconomymanchester.com/news-events/news/greater-manchester-can-expect-to-gain-110-000-new-jobs-over-next-decade), but this also puts further pressure on an already undersupplied market. (http://www.jll.co.uk/united-kingdom/en-gb/news/3146/manchester-city-centre-facing-continued-housing-shortage)

The UK government has been extremely smart in their reduction in corporation tax (tax on company profits) over the next few years. This will not only ensure many of the major employers remain in the UK, but will make it more attractive for other multi-national companies to set up shop here. It will enable smaller companies to grow through reinvesting more of their profits, thus creating more jobs and further boosting local economies.

The government has also in recent years introduced more tax incentives for new companies through SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) where investors can receive 30-50% tax relief on upto £100,000 per tax year, plus receive upto 45% loss relief on their remaining ‘risked’ capital, essentially only risking in total under 30% of their investment. Over £1/4bn is raised through EIS and SEIS investment each year. (https://www.eisa.org.uk/using-eis/facts-figures/)

All of the above factors are keeping the UK economy strong, keeping employment levels high, unemployment at record lows, continually attracting new businesses to the UK, and with the weak pound is also attracting more and more foreign investment.

Should You Buy a House After Brexit?

Many investors and first time buyers ask ‘Should I Buy A House After Brexit’, and we strongly believe the answer is yes! Property should always be considered a long term investment unless you are experienced in flipping on properties for profit. Average house prices in the UK have continued to rise consistently for the last 100 years (over 47,000% from 1926-2016), through multiple wars, and huge economic crashes. The reason for this consistent growth is the same as always… Supply Versus Demand!

Property prices will not do what they did in 2008 as banks are much more cautious with their lending now and are safeguarding both themselves, but also the investor/buyer from any dip in prices if this ever occurred. The other thing to note is that in a dip or a crash, it is generally harder for first time buyers to get lending therefore provides an advantage to landlords as the demand for rental properties increases further.

Overall opinion is that although there is uncertainty about Brexit, there is enough evidence to suggest that there are still some excellent opportunities with regards to investing in property in the UK, and that property, above all other asset classes should be considered one of the safest.

We are looking forward to hearing from you regarding you next investment. If you would like to talk with us directly you can call us on  +44 (0) 2039507939 or send us an email at info@thirlmeredeacon.com. If this is your first time landing on Thirlmere Deacon Property Investments I encourage you to visit our homepage https://tdpropertyinvestment.com to read more about us and to see what we have on offer.

Thirlmere Deacon Ltd

Thirlmere Deacon Ltd UK Property Specialist

Thirlmere Deacon Property Investment
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Stuart Williams
stuart@thirlmeredeacon.com
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