Over the last 12 months there have been some monumental changes in the UK political arena with many more expected in the short to medium term. The UK economy has held up fairly well during these difficult times as has the UK property market. There may be signs of flagging at the moment but on the whole the economy and the real estate market have performed much better than experts had predicted since the Brexit vote. Some so-called “experts” forecast Armageddon for the UK property market but so far no sign of it.
Let things settle down
The only major concern in the short term has been the fall in the UK currency which is down by around 20% against the dollar and well down against the euro over the last 12 months. We may see more downside in the short term, depending upon how Brexit negotiations progress, but this is the only real problem at the moment. UK interest rates remain relatively low, finance is readily available and the supply/demand ratio of the UK property market is still skewed towards demand with relatively few properties available for sale. Against this background, if you are a long-term investor is there any real need to panic and adjust your portfolio just yet?
Keep your eye on the long-term picture
In the short term there is no doubt that the UK economy will suffer some bouts of volatility which will obviously rub off on the UK property market. What the UK loses with potential trade barriers to Europe it could partly replace with new trade agreements with the likes of India, Canada, Australia and other countries around the world. Membership of the European Union meant that no members were able to negotiate their own trade agreements and were instead dependent upon European Union block arrangements. So, what the UK potentially loses on one hand it could potentially make up on the other?
It is also worth noting that prior to Brexit there were concerns about the European Union and the euro even continuing. These concerns seem to have been transferred to the UK despite the fact there are still underlying concerns regarding European Union harmony in relation to free movement, the economy and the currency. For some reason these concerns have been pushed to one side and no doubt the UK will be blamed for any short-term volatility.
Rental yields holding up
Those who have buy to let properties will likely see little or no change in their rental income in the short to medium term. The economy is still performing well so those renting properties still have money in their pockets. At the end of the day, buy to let investors tend to take a long-term view with rental income covering their short-term obligations while in the longer term they will be be looking towards capital appreciation on their properties. On that basis, again, is there any need to panic and sell up?
The reality is that nobody knows how Brexit will pan out, how the UK economy will perform and whether demand for UK property will continue. The early indications are that the UK economy is still relatively strong as is the UK property market. Negotiations with the European Union will no doubt be prolonged and difficult at times but eventually Brexit will drop into place and the UK will be free to negotiate its own trade agreements with other countries. It would also seem bizarre for the European Union to introduce tariffs for UK goods and services when the UK itself buys more goods and services that it actually sells to the European Union. Why would they cut their nose off to spite their face?