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Blog // 14/06/2016

BREXIT and property prices – what does it all mean?

How might Brexit effect UK property prices?

Recently there has been daily articles in the press or announcements from the Remain or Leave campaign about what a Brexit will mean for the UK property market, property prices and; for every claim there appears to be a counter claim. Depending on the view point of the journalist, the impact of a Brexit particularly on property prices, and whether this may be a good thing or not is also influencing the headlines.

Property Prices: what are the claims?

There are claims that a Brexit will cause house prices to fall by large percentages and that London and the South East will be more affected than other areas. For first time buyers a ‘price correction’ as it has been referred to, may be considered to be a good thing but not for those who have invested heavily in their properties. The impact in respect of the availability of mortgages and the associated increase in interest rates has also been in the news as has the potential that developers may limit the number of properties being built, reducing availability of affordable houses. These factors may or may not therefore negate any benefit of lower house prices.

In addition, there are other arguments that in the immediate aftermath of a Brexit the value of the sterling will sharply reduce, thereby making properties in the UK cheaper for overseas buyers which will actually result in an increase in investment and therefore a ‘bounce’ post Brexit. This and other claims therefore suggest that house prices will increase.
As the majority of voters are directly impacted by the value of property, particularly residential, it is clear to see why this is a focus for arguments from both sides. It is also clear that the uncertainty leading up to the referendum has impacted the UK property market, slowing it down in respect of both investment into the UK and people moving home. There are also many other factors that may have influenced this as well, such as the changes to stamp duty for second homes, interest rate relief and the taxation of foreign owned property.

Our recent survey into property prices

At Menzies we were interested to see what our clients and contacts thought, so we carried out a recent survey and below is a summary of the results:

Expectation for property prices:

  • 44% or respondents believed a Brexit would cause house prices to decrease
  • However a slightly larger percentage of 50% believe prices would remain steady so that a Brexit would have no impact
  • The remaining 6% believe that prices will increase are in the minority.

Foreign investment into the UK property market:

  • Interestingly, 70% of respondents believed that foreign investment into UK property will remain high irrespective of whether the UK exit the EU and regardless of the other recent tax changes which arguably make it less attractive for foreign investors. The overriding opinion is that UK property is still seen as a ‘safe investment’.

Property prices across the UK:

  • 90% of the respondents believe that the property price differential between the South East and the rest of the UK will either widen or remain the same.

The only thing that appears clear is that nothing is clear! What a Brexit will actually mean is for all parties ‘crystal ball gazing’ to a large extent and we will all have to wait and see what happens on the 23 June.

Comments and analysis provided by Lucy Mangan, on behalf of Menzies Property and Construction sector team.

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