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PropEx
Member
do you all see a Brexit(if it happens) affecting the UK property prices. Would it be good or bad?
Nicholas Wallwork
Editor-in-Chief
Staff member
Premium Member
Hard to tell but any major change is bound to have an impact in some form... I think the UK property market will remain boyant as it won't stop foreign investors buying here and the local supply vs demand will also remain strong so I can't see too much of a slow down happening just due to this. If there is a period of uncertainty it will give experienced investors a good reason to buy a little cheaper and as long as they're holding longer term the markets will bounce back whatever happens. I'm not concerned but interested to see how it all pans out...
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nmb
Well-Known Member
As the UK imports more goods from Europe than it exports to the European market in reality the European Union needs the UK more than the UK needs the European Union. However, any uncertainty would have an impact on the pound which could impact economic growth as markets adjust to life outside the European Union (if this was to happen). There is also the constitutional issue with the Scottish government threatening yet another referendum on independence if the UK was to leave Europe.
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Ricky Bhurji
Member
Premium Member
I think the game has changed- I could see this actually happening. Boris Johnson has openly claimed that he will be indeed voting for a Brexit. The UK has London, its own currency, own interest rate policies - and I think that the global phenomenon that is "London" will give the UK all it needs in terms of overseas investment/interest/visitors. Much more so than any other European city counterpart. Simply put, the UK doesn't need Europe the same way Europe needs the UK. I appreciate that this will mean that the pound will drop dramatically as people will panic temporarily but maybe thats what the government want - it'll make exporting much cheaper! This in turn over the longer term will give the UK a unique standing - in that we will become even more of a safe haven than before (more like Switzerland) and thus, property prices will continue climbing long term!
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nmb
Well-Known Member
Many people seem to overlook the fact that the UK has been the lone voice in the EU against the euro and also the wider convergence of European governments. Whether or not you agree with the UK stance (the UK has the most disputes with fellow European partners),has the UK ever really been fully integrated into Europe?
Those who suggest that for example the financial markets will switch from London to Europe conveniently overlook the fact that the Far East and US stock markets managed to operate outside of the European Union. London is for many the worldwide financial powerhouse which is perhaps an after-effect of the now much diminished British Empire of years gone by.
Those who suggest that for example the financial markets will switch from London to Europe conveniently overlook the fact that the Far East and US stock markets managed to operate outside of the European Union. London is for many the worldwide financial powerhouse which is perhaps an after-effect of the now much diminished British Empire of years gone by.
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propertyvalues
New Member
Simple. There'll be a catastrophic fall in prices like the UK has never witnessed.
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nmb
Well-Known Member
@propertyvalues
There are positives and negatives regarding the U.K.'s continued membership of the European Union. I read somewhere that experts predict a 20% reduction in sterling exchange rates in the event of an out result. I would be interested to hear about your theory of a "catastrophic fall" in UK prices. Surely there is an argument that the Euro is one of the weakest currencies in the world and the ever closer relations between EU members are imbalanced in favour of heavyweights such as Germany, France, etc?
There are positives and negatives regarding the U.K.'s continued membership of the European Union. I read somewhere that experts predict a 20% reduction in sterling exchange rates in the event of an out result. I would be interested to hear about your theory of a "catastrophic fall" in UK prices. Surely there is an argument that the Euro is one of the weakest currencies in the world and the ever closer relations between EU members are imbalanced in favour of heavyweights such as Germany, France, etc?
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propertyvalues
New Member
Yes at the moment the Euro is very weak thanks to Draghi's actions. But I don't see that having much of a bearing on UK prices if there is a Brexit. At present the PE ratio is the highest it has ever been and continues to climb - especially in London. Mortgage debt although accelerating at the moment, will in my opinion, slow significantly in the event of a Brexit. And house prices are correlated very strongly to mortgage debt. Declines will therefore impact prices negatively. Having said that, even without a Brexit, at some point mortgage debt will slow and prices will fall. How far and how fast is anyone's guess. It will all depend upon how much mortgage debt falls and for how long. But also, the historically high PE ratio in London doesn't bode well. One can make any number of arguments that UK property is unlike any other property market and prices will always continue to rise without any corrections. But I have yet to see any asset class where prices have not reverted to the mean at some point in time - regardless if the market is up or down. From my perspective, there are too many downside risks to an investment in UK property. Although I am acutely aware that most people will disagree with me. But that's always the case when prices stray too far from the mean. When markets are in the doldrums many a commentator will lament that prices will never recover. When the market is abnormally skewed far from the mean, most people believe that somehow, this time it is different. Also, if interest rates were to return to their historical average tomorrow, then consider how many people would be underwater and the impact on prices? Most new entrants into the buy to let market have based investment purchases on fundamentals and assumptions - which if turn out to be incorrect - will impact their investment to the downside. Even the Bank of England is concerned about the threat to financial stability arising from the buy-to-let market when interest rates finally start to rise. Buy to let investors are relying upon capital appreciation whilst the tenants pay the financing costs. Well that sounds like it makes sense until you consider what happens when mortgage debt starts to fall or interest rates start to rise. Without government meddling in the housing market, I doubt very much we would have seen the acceleration in mortgage debt from the lows of 2008. Last but not least a Brexit would cause a lot of market uncertainty which cannot be good for government or the economy. Additionally, the political fallout from a Brexit has not even been discussed by either side. It stands to reason the EU will have very little motivation to offer the UK a great trading deal and risk secessionist moves from other countries in the block. And they will be in no hurry whatsoever to conclude negotiations, which will only add to market uncertainty and could very well increase the costs of government to service debt and the budget deficit. That means higher interest rates.
I would not be surprised to see a change in attitude from the BOE should a Brexit become reality. That's my two cents worth. Only time will tell if I am right or wrong. Either way, I am not exposed and have nothing to lose except an opportunity cost.
I would not be surprised to see a change in attitude from the BOE should a Brexit become reality. That's my two cents worth. Only time will tell if I am right or wrong. Either way, I am not exposed and have nothing to lose except an opportunity cost.
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nmb
Well-Known Member
There has already been a significant devaluation of sterling against the US dollar and many experts expect this to continue for the foreseeable future. There is a fundamental argument as to whether the UK should be an integral part of the European Union especially when you bear a mind the UK is highly unlikely to ever accept the euro. As a consequence, is there an argument to suggest that the UK is being dragged down by the European Union and its economic woes?
The constant speculation about the UK economy in light of Brexit is healthy but at the end of the day the UK is the fifth largest economy in the world, would any right minded country cut off its own nose to spite its face and refuse to deal with the UK? I fully acknowledge the argument regarding UK base rates but whether or not we leave the European Union rates are unlikely to rise significantly until at least 2020/21. You could argue this prolonged period of low interest rates and low inflation is storing up problems for the future no matter which path the UK takes?
The constant speculation about the UK economy in light of Brexit is healthy but at the end of the day the UK is the fifth largest economy in the world, would any right minded country cut off its own nose to spite its face and refuse to deal with the UK? I fully acknowledge the argument regarding UK base rates but whether or not we leave the European Union rates are unlikely to rise significantly until at least 2020/21. You could argue this prolonged period of low interest rates and low inflation is storing up problems for the future no matter which path the UK takes?
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propertyvalues
New Member
From my perspective, I have yet to see any substantiated credible argument that the UK would be economically better off leaving the EU.
For example: if I am a manufacturer with a large proportion of exports into the EU, then it would make sense to shift operations into the EU trading zone or face declining revenue. The Brexit campaigners argue there are other countries aside from the EU with which to trade. But that will be of little comfort to me - because if that were true, I would already have expanded operations to serve any demand where the Brexit campaigners insist exists.
Also, Brexit campaigners promise that trade negations post Brexit will be swift and favourable to the UK. Maybe that would be true IF we controlled the negotiations. But we won't. It will be the bureaucrats in Brussels. And they have EVERY motivation to make negotiations lengthy and difficult - regardless of the size of our economy.
The USA won't be in any hurry either to negotiate a new deal with the UK, unless we have something they want. In other words: leverage. At the risk of upsetting the EU - from whom there is more to gain for the USA - they will drag their heels. They have already made it clear they want the UK to remain part of the EU. Politically, the UK within the EU is leverage and benefits the USA. Outside, we are just another bit player without anything much to offer. A Brexit will just annoy the USA - having made it previously clear they wish us to remain.
Then there is the political equation. Firstly, any deal which looks favourable for the UK will increase secessionist aspirations of other parties like the Far Right across the EU. Le Pen of France is one such notable example. Political leaders and EU bureaucrats will be keen to stamp that out quickly by demonstrating an EU exit bears a heavy price and serious consequences. The UK will be served up as an example to others who aspire to leave.
Now the economic question. Only three things can happen upon a Brexit:
1) Economic growth rises
2) Economic growth levels off.
3) Economic growth falls.
I can't see how a Brexit will contribute to a rise in economic growth. Or why the economy would just level off. But I can see many, many reasons why economic growth would fall - and in turn create a nasty feedback loop which damages the economy more than anyone can predict.
The money saved in financial contributions to the EU pales in comparison to the money that will be lost in the economy. And for immigration? Well, let's not forget that immigration over the last 15 years has been a net contribution to our economy. Not a loss as claimed by the Brexit campaigners.
It is also worth considering a little thought experiment: California is the 8th largest economy in the world and a proportion of their federal taxes paid go to the poorer regions of the country. They also have to accept free movement of people from all over the country. The state is also subject to reams of bureaucracy dictated by Washington. So, would California be better off if it seceded from the USA? Would the the federal government be inclined to negotiate a favourable trade deal if they left the Union at the risk of inciting other seccessionist calls from other states?
If we vote for a Brexit we will become a "bit" player economically and politically. Our economy is where it is today as a result of us joining the EU in 1973. Before that we were the sick man of Europe.
The EU is stronger than the UK politically and economically. And they will exercise that strength should we decide to leave.
For example: if I am a manufacturer with a large proportion of exports into the EU, then it would make sense to shift operations into the EU trading zone or face declining revenue. The Brexit campaigners argue there are other countries aside from the EU with which to trade. But that will be of little comfort to me - because if that were true, I would already have expanded operations to serve any demand where the Brexit campaigners insist exists.
Also, Brexit campaigners promise that trade negations post Brexit will be swift and favourable to the UK. Maybe that would be true IF we controlled the negotiations. But we won't. It will be the bureaucrats in Brussels. And they have EVERY motivation to make negotiations lengthy and difficult - regardless of the size of our economy.
The USA won't be in any hurry either to negotiate a new deal with the UK, unless we have something they want. In other words: leverage. At the risk of upsetting the EU - from whom there is more to gain for the USA - they will drag their heels. They have already made it clear they want the UK to remain part of the EU. Politically, the UK within the EU is leverage and benefits the USA. Outside, we are just another bit player without anything much to offer. A Brexit will just annoy the USA - having made it previously clear they wish us to remain.
Then there is the political equation. Firstly, any deal which looks favourable for the UK will increase secessionist aspirations of other parties like the Far Right across the EU. Le Pen of France is one such notable example. Political leaders and EU bureaucrats will be keen to stamp that out quickly by demonstrating an EU exit bears a heavy price and serious consequences. The UK will be served up as an example to others who aspire to leave.
Now the economic question. Only three things can happen upon a Brexit:
1) Economic growth rises
2) Economic growth levels off.
3) Economic growth falls.
I can't see how a Brexit will contribute to a rise in economic growth. Or why the economy would just level off. But I can see many, many reasons why economic growth would fall - and in turn create a nasty feedback loop which damages the economy more than anyone can predict.
The money saved in financial contributions to the EU pales in comparison to the money that will be lost in the economy. And for immigration? Well, let's not forget that immigration over the last 15 years has been a net contribution to our economy. Not a loss as claimed by the Brexit campaigners.
It is also worth considering a little thought experiment: California is the 8th largest economy in the world and a proportion of their federal taxes paid go to the poorer regions of the country. They also have to accept free movement of people from all over the country. The state is also subject to reams of bureaucracy dictated by Washington. So, would California be better off if it seceded from the USA? Would the the federal government be inclined to negotiate a favourable trade deal if they left the Union at the risk of inciting other seccessionist calls from other states?
If we vote for a Brexit we will become a "bit" player economically and politically. Our economy is where it is today as a result of us joining the EU in 1973. Before that we were the sick man of Europe.
The EU is stronger than the UK politically and economically. And they will exercise that strength should we decide to leave.
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nmb
Well-Known Member
My gut feeling is that the UK would be better off in the European Union but there needs to be a total overhaul of how the European Union is run. Many of the politicians dictating policies to European Union members are unelected and let's not forget that it is over 20 years since the EU accounts were last signed off. David Cameron fudged his opportunity to manipulate an overhaul of the EU and has not gone far enough in my eyes.
