While there was always a suspicion that the UK population would vote to leave the European Union many never actually expected it to happen. Whether we would see last-minute concessions from the European Union, a raft of Labour voters following their party’s lead or what many see as common sense it just did not happen. As it stands London will be ripped out of the heart of the European Union potentially putting the financial sector at risk as well as the London property market.
However, if you take a step back and look at the situation what are the viable alternatives to London property?
Reasons to invest in London
There is no doubt that the success of the London financial sector has had a significant impact upon the London property market. When you also take into account foreign investment, especially in central London, there is no doubt it has been extremely popular. However, for many people London has offered a gateway to the European market via a currency which has until lately been relatively strong and less volatile than the euro.
While London itself is an enormous area such has been the demand for property over the years that the scarcity of quality real estate has pushed prices into a different stratosphere compared to the rest of the UK. Experts have time and time again tried to call the top of the London property market but such has been the backbone of demand that any short-term weakness has often been seen as a long-term buying opportunity by domestic and foreign investors.
Could Paris be an alternative?
When you bear in mind that Paris is the most popular tourist destination in Europe and one of the most popular in the world it could potentially benefit from any fall in demand for London property. At around £6000 per square metre, compared to the £12,400 per square metre in London, Paris could conceivably attract those previously targeting the London property market. They may see better value in the longer term, they may see less risk in being associated with the euro but what is the economic outlook?
At the moment it is guesswork as to how Brexit will impact the UK economy in the short, medium and longer term as nobody has been through a “messy economic divorce” quite like this. What is not guesswork is the state of the French economy which is certainly struggling with calls also growing for an EU membership referendum amongst the French electorate. So, with confusion and misinformation certainly prevalent at the moment will investors really switch to Paris?
While there is much focus on the UK economy at this moment in time it is worth remembering that the European economy is also struggling. The uncertainty surrounding UK membership of the European Union will also have an impact upon the European economy going forward. Some experts are calling the end of the European Union, some suggest it will be stronger without the UK while others refuse to believe the UK will not be offered some kind of associate membership. So, while the London property market is certainly coming under pressure, even the second most expensive property market in Europe, i.e. Paris, is not exactly firing on all cylinders at the moment.
Will foreign investors return to London when the dust settles? Will London’s safe haven status remain in the longer term? Or could we see investors switching to the likes of Paris and other European capital cities? Many have tried to call the end of the London property market boom but few have been successful – is this the moment?