David Cameron started the ball rolling prior to the last general election suggesting there would be a referendum about the U.K.’s continued membership of the European Union. At the time this was seen as a subject that wouldn’t materialise for many years but we are fast approaching D-day. While we still await the official date for the EU referendum it is likely to be no later than 2017 and is starting to grab the headlines.
This comes at a time when the London property market is showing signs of weariness, price increases are muted and other areas of the country seem to be benefiting from a revival in UK property. Is the EU referendum having an impact upon London property prices and will the uncertainty continue until voting day?
While much is made of the number of international investors looking towards the London property market in reality this is a market still dominated by UK investors. True, we have seen wealthy individuals from Russia, China and many other areas of the world looking towards the luxury London market but it is still dominated by UK investors. However, the element of international investors looking towards London will have one eye on the EU referendum and the implications in the longer term.
EU free movement
The EU free movement regulations allow EU citizens to move between member states with limited checks. Much has been made of the increase in UK immigration, which many blame on the welfare system, and this has had an impact upon demand for property. As the UK population continues to grow so we have seen demand for property increase dramatically, more so in the popular areas of London.
Would there be less demand if the UK was removed from the European Union? Would property investors see a reduction in their return on investment?
As we have mentioned on numerous occasions, investment markets can re-evaluate themselves in any scenario as long as they have the information to hand. When there is uncertainty there will be massive divergences of opinion which can have a significant impact upon investment strategies and activities. Where there has been uncertainty in recent times, such as the Scottish independence referendum, the Edinburgh property market stagnated and many investors decided to watch from a distance. It is only now, just over a year after the referendum, that things are starting to move back to “normal” in many of Scotland’s more prominent property markets.
You would hope that politicians learned from the extended Scottish independence referendum campaign, and the harm this did to the local economy and property market, but it would appear not. The longer this EU referendum drags on the more harm this will do to various property markets and as voting day gets closer so the uncertainty and the concern amongst investors will rise.
Whether or not you agree with the EU referendum called by David Cameron it is the uncertainty over this issue which will, and is to a certain extent already, have an impact upon the UK property market. More prominent areas such as London will likely bear the brunt of any investor concerns until we know the facts and eventual decision.
There are hopes that the UK government will be able to negotiate a new agreement with various concessions. Ultimately the European Union would be weakened if the UK was to pull out and this is the last thing European Union members need after the recent financial collapse.