As we approach the referendum vote on continued UK membership of the European Union media frenzy is reaching new levels. The property market has come in for particular attention over the last few weeks amid suggestions a withdrawal from Europe could see the UK property market collapse. A number of heavyweight figures such as the IMF have positioned themselves as some kind of spokesperson for the UK property market amid warnings about a withdrawal from Europe. This is causing real concern amongst not only relatively new property investors but also those with experience.
What is the underlying picture and should we really be concerned about a potential exit from Europe and the impact this would have on UK property prices?
Filling the information vacuum
At this moment in time speculation by groups for and against continued membership of the European Union cannot be proved but perhaps more importantly they cannot be disproved. At a time when investment markets are looking towards governments and official recognised bodies for guidance the problem is there is even more confusion. One thing is certain, a withdrawal from Europe would give the UK a number of challenges in the short term but this is probably no different to when the UK joined the so-called “Common Market”.
Suggesting that a decision about membership of the European Union should be based upon short-term volatility tends to smack of a project fear type strategy. Can the same pro-European bodies prove there are no medium to long-term benefits for the UK if it was to go it alone?
Not long now!
Various polls over the last few weeks have put the so-called Brexit campaign slightly ahead of the Remain campaign. It will be interesting to see the eventual result because history shows us that those “sitting on the fence” are likely to come down in favour of the current status quo. However, the more active group of voters will no doubt be those looking for an exit from Europe because it is far easier to vote for change than to vote to remain the same.
Some of the financial headlines suggest that the UK property market has stalled and prices are in freefall. It is debatable whether this is actually the underlying situation because let’s not forget the recent adjustment to official average UK property prices. The relative strength of the UK property market over the last few years should not be underestimated as many might suggest any recent consolidation is purely a slow deflation of the market down to more reasonable levels.
Will it be back to business after the vote?
Whether pro-European or anti-European voters win the day the UK property market will re-evaluate, reposition itself and start again as soon as the vote is known. Uncertainty, as we have said on many occasions, is the archenemy of any investment market because if you have the detail of any specific upbeat or downbeat situation it is much easier to value assets accordingly. Where there are many unknown variables the range of valuations can and does vary enormously which is not helpful.
So, once the vote is over, the decision has been made it will probably be back to business for the UK property market.