Should you be concerned about your EU property assets?

Since Boris Johnson took over the role as Prime Minister of the UK there has been constant conflict with his EU counterparts. Despite the fact that the Houses of Parliament refused to rubberstamp the withdrawal agreement the EU has refused to reopen the agreement for amendments. As a consequence, Brexit talks are now in stalemate and those close to the negotiations do not hold out much hope for the future.

EU economy

It is ironic that the UK economy is outperforming the majority of EU economies despite the grey clouds of Brexit overhang. This comes at a time when the German economy is under extreme pressure with experts predicting a fall into recession. You can pretty much guarantee if the German economy is struggling then the rest of Europe will ultimately follow. So, what does the future hold for European property assets outside of the UK?

EU budget

Those who follow the EU will be well aware of the array of subsidies afforded to members. Historically we have seen significant investment in new member states although this has been curtailed somewhat in recent times. The EU budget for 2020 has already been announced but interestingly the EU has counted the UK £39 billion settlement bill as part of next year’s budget. In fact, the UK element makes up more than 30% of next year’s EU budget. What happens if the UK fails to agree a deal with the EU?

Property will struggle in a recession

Even though many so-called “experts” forecast the UK would drop into a deep recession in light of the 2016 referendum, there are no signs as yet. The London property market is struggling but the rest of the UK is still showing growth. If we switch towards the European Union, what are the prospects in the short to medium term?

EU interest rates have turned negative on occasion in recent times and with a possible recession on the horizon there may be further downward pressure. The fact is that during a recession it would be extremely difficult for property prices to move forward. There will be pressure on the workforce, pressure on household income and ultimately pressure on the housing market. As a consequence, it does look as though the EU property market will at least experience some headwinds in the short term even if there is no certainty how long these will last.

Is UK property safe?

There are a number of factors to take into consideration when looking at UK property one of which is the weak currency. This has prompted a significant increase in overseas investment with a 20% plus exchange rate bonus for dollar and euro investors over the last three years. It is difficult to say with any certainty the direction of sterling in the short to medium term but perhaps it is safe to say we have seen the worst of the downturn?

As a consequence, bearing in mind the relative strength of the UK economy compared to its EU counterpart, is it safe to argue that UK property is safer than EU property in relative terms?

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