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Brexit blues: how would a no deal Brexit affect UK property market?

Brexit on your mind? You’re not alone.

A little over two years ago, the British people voted for Brexit, signal the end of relationship between the UK and the EU.  The agreement continues to stumble on many points, the ongoing uncertainty around Brexit, when and how it will happen, is really putting the brakes on a lot of people ‘ plans to invest in current property market.

When UK officially left the EU, whether your vote was for remain or leave- it will be a difficult game to understand that the impact will be negative or positive based on a complicated set of competing variables.

Today, UKLEJU looked at the statements from a few UK leading real estate’s companies to give an insight of the future Brexit impacts on property market.

(Source from London Evening Standard)

1. According to Rightmove, London’s 32 boroughs have seen asking prices drop in the past year as Brexit uncertainty continues weighing heavily on the UK property market.

For local buyers, most people are sitting on their hands waiting for some kind of windfall saving instead of buying now, which has slowed down property market activity. Inexperienced property investors and first-time buyers are concerned that if they buy now, they’ll miss out on a cheaper deal in a few months.

2. According to KPMG, UK property prices could drop by 6.2% next year if the UK leaves the EU without a deal on 31st October.

Many property agencies expect pricing to strengthen after 2019 as political risk fades. Furthermore, the year of the next schedule UK general election might impact the stability of the present government. From an investor’s point of view, they therefore forecast weaker price growth in 2022 and HK leading developer, Knight Dragon predicted that the stronger growth will return in 2023.

3. The Bank of England says that house prices could fall by up to 30% if we find ourselves in a ‘no deal’ situation. This is almost double the biggest drop experienced after the financial crisis (17%).

From the B2B property professional’s views, it seems that the sales volume continue to be at record low levels and ongoing Brexit uncertainty is impacting consumer confidence.

4. An estate agent of Foxtons says that the current UK property market fell in the first quarter and housing market in the central London is “very challenging. UK property developer’s confidence is affected, which means that the expansion of supply has slowed.”

However, if you’re considering investing in residential buy-to-let property, whether for the first time or to grow an existing portfolio, now might be a good opportunity. The limited supply of housing market caused the rent rising faster than house prices, yields are at their highest since 2015.

5. Estate of Foxton concluded: ‘For committed investors, buying opportunities are emerging once more where prices have weakened,’ he concluded.

In other words, changes caused by Brexit have understandably affected the sector’s growth, but increased investors’ confidence. It’s no less of a factor in the rental market of UK, however, where policy changes for landlords are affecting demand and supply dynamics, and pricing.

No deal Brexit is one of the worst situation that UK property market can face, the lack of a deal could negatively impact London’s status as a global financial centre. The British pound has dropped to its lowest level since 1985, and it is a reflection of the lack of confidence of UK currency on the global markets.

6. The Brexit had had a positive effect on Chinese property buying inquiries, which sit 43.2% higher than they were at the time of the UK vote to leave the European Union according to Juwai.

The Pound Sterling has fallen in value since the Brexit referendum took place on June 23, 2016, this opened another door for overseas investors, especially Chinese buyers. Affordability was a key concern for most overseas investors, Brexit will affect some oversea investor’s views on residential investments in the UK as it will be cheaper in historical terms.

(Source from Bank of England)

7. According to Chinese international property portal, the Chinese property buying inquiry numbers are still rising even 18 months after the vote. These strong buying levels are expected to remain at similar levels throughout 2019.

Surprisingly, a “no deal” Brexit may lead to a greater property market for buyers outside the UK. Due to the low Sterling, oversea investors can buy UK property for about 10% less, says by a 10th years experienced property industry professionals.

8. A property agent of St George mentioned about recently they’ve seen a particularly strong appetite for both home development and commercial opportunistic stock.

The sales increase in London capital from international buyers has been noticeable. In this way, the deals that are offered to the market still seem to draw in a healthy level of prospective buyers, both domestic and international. Once again, the plummeting British Pound would be a primary driver of Chinese property investment in the UK.

Sooner this year or next year, UK will finalise a Brexit deal with EU, which is something both parties appear to be tentatively moving towards.

Overall, the housing market, as with all markets, can absorb and adjust to change. Uncertainty is the most challenging factor of all, so sooner is better when it comes to a Brexit outcome. There will always be winners as well as losers, forecasting future property market in UK has unique challenges for both B2B and B2C clients.

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