When the polls closed at 10 o’clock last night it was odds-on that the Remain campaign would win the day in the UK EU referendum. With odds of 9/1 on that Remain would be the flavour of the day, currencies and stock markets around the world breathed a sigh of relief. However, as the trickle of results began to hit screens it very quickly became apparent this was not a one-horse race.
By 8 o’clock this morning the result was announced with the Remain campaign polling just over 48% while the Brexit campaign attracted just under 52% of the vote. So, where does this leave the UK property market in the short, medium and long term?
No immediate change
The process by which the UK will leave the European Union is both complex and cumbersome with some suggesting a timescale of up to 5 years. While markets will react quickly to the changing landscape in the short term many believe money markets and investment markets will take stock of the situation and then re-evaluate asset prices in a more orderly fashion than expected as the news flow gathers pace. There will be tough talking from the UK and Europe but at the end of the day it is in the interests of both parties to reach an amicable long-term trading arrangement.
The pound fell sharply against the dollar on news of the Brexit win although the fall against the euro was more subdued. The FTSE 100 immediately fell by just over 8% but has since recovered and is currently down 1.9% on the day. David Cameron has decided to step aside unexpectedly soon although this will pave the way for a new approach to the UK economy and long-term relationship with Europe.
It is also worth noting that the Bank of England has confirmed it will do “whatever is necessary” to calm financial markets and stands ready to inject £250 billion worth of liquidity if required. It would seem that contingency plans have been in place for some time in the event of a Brexit victory even if the financial markets themselves were caught off guard.
In the short term there are perhaps greater concerns for the London property market in light of the number of foreign investors active in this particular area. Currency movements will impact perceived value for money but until we see a clear long-term picture for the UK economy there may be reluctance from some investors to commit to long-term projects.
There is talk that the UK housing boom is over amid suggestions there will be no growth in property prices during 2016. At the end of the day, if UK property was to maintain its current value in light of the ongoing challenges ahead this in itself would be a positive result. Interestingly, some experts believe that long-term investors will see any weakness in UK property prices in the short to medium term as a buying opportunity.
While we wait for the UK government to enact article 50, which will begin the process of leaving the European Union, many believe that the EU/UK relationship is not over yet. Will the UK re-join Europe as some kind of associate member or will the whole EU project change in the medium to long term?
Let’s not forget that there are many other EU members under pressure to hold similar referendums and the “success” of the UK referendum will put the likes of France, Denmark and Holland under enormous pressure to follow suit. It will be an extremely volatile time over the next few days, weeks and months but perhaps the result of the UK EU referendum is the wake-up call that the European Union has been trying to avoid?