As we approach decision time for UK MPs there is real concern about the possibility of a no deal Brexit for the UK. Early indications suggest that Theresa May could lose by as many as 200 votes although other forecast make it significantly closer. Investors are steadying themselves for a run on the pound, holidaymakers have been advised to exchange their funds before the vote and everything seems to be up in the air. So, what does this mean for the UK property market?
There are very few, if any, similar political scenarios in recent times. The UK is on the verge of crashing out of the European Union and become something of a pariah. Well, that is the doomsday scenario being portrayed by the media.
Let’s take a look at the facts as the UK property market stands at the moment:-
• Property prices with the exception of London are still rising
• Demand for private rental properties is still increasing
• The UK economy is still expected to grow in the short term even in the event of a no deal Brexit
• In a worst-case scenario, World Trade Organisation rules would come into play
The fact is that the UK electorate voted to leave the European Union on 29 March 2019. There will be an inevitable transition period, lasting up to 2 years, but the eventual outcome will be a parting of the ways. Or will it?
The UK currency has been surprisingly strong in light of Brexit concerns. Money markets seem convinced that the European Union will step forward with a “zero hour” offer. Indeed, the German Foreign Minister has already confirmed that more talks can take place with the UK despite earlier suggestions to the contrary. Whether it does turn into a case of “sell on the fact” remains to be seen but so far sterling has proven to be relatively strong.
There is a growing opinion that tonight’s vote will not be the last and the European Union will be forced to step into the breach. The simple fact is that the European Union does twice as much trade with the UK as the UK does with the European Union. That said; any significant reduction in UK/EU trade would hit the UK economy harder in relative terms.
Property owners proving resilient
One of the more striking trends in the UK property market of late has been the relatively low number of sellers. Despite suggestions of a doom and gloom scenario, with property prices collapsing by up to 30%, potential sellers remain extremely resilient. On the flipside of the coin, investors are quite happy to sit on the sidelines and let Brexit take its course so this has resulted in a relative stalemate between buyers and sellers.
Quietly, but in significant numbers, overseas investors continue to pick up UK property and take advantage of the two-year fall in sterling. This is likely to continue for some time to come especially towards the luxury end of the UK property market. Over the last two years many overseas investors have seen a near 20% discount emerge when converting their home currency into sterling. For many, this will prove an opportunity too good to miss!
Remainers forecast a collapse in the UK property market the day after the referendum two years ago. Many are making the same forecast after the vote in the Houses of Parliament at around 8 PM this evening. As mentioned above, we are moving towards uncharted waters, dangerous shark infested waters, with as yet no safe route through emerging. Will the UK really decide to go it alone?