While Theresa May has been ridiculed over the last few weeks for her “indecisive” approach to Brexit, she hit back today in style. The UK Prime Minister delivered a riproaring speech confirming that the UK will not be re-joining the European single market and will instead look to negotiate a stand-alone trading agreement with the European Union. After concerns in the currency markets over the last few days it was interesting to see the pound recovered slightly against the dollar although time will tell whether this will stick. So, what will Theresa May’s speech do for UK property?
Brexit and settling markets
Whether you were for or against the UK withdrawing from the European Union there is no doubt that it has unsettled the UK property market and London in particular. As we have mentioned on numerous occasions, investment markets have a passionate dislike of uncertainty and even if the news is disappointing they would prefer to know what was happening. The fact that Theresa May has now set out her negotiating tactics in more detail will allow the UK property market to adjust to the changing environment.
It will be interesting to see how the London property market reacts as we approach the March trigger of Article 50. While critics will suggest otherwise, the fact remains that the European Union needs the UK as much as the UK needs the European Union. Therefore, while formal ties will be lost there will still be a deep seated relationship going forward which should at least help to stabilise the UK property market.
Much of the spotlight over the last few months has been on immigration and the ever-growing number of EU citizens moving to the UK. While it is true that the UK will “regain” control of its borders those who automatically assume that immigration will be cut to a minimum will need to think again. Aside from the fact the UK needs immigration to fill gaps in the employment market, taxation, etc there has always been significant immigration from non-EU countries. So, while immigration in the future may be more controlled there will still be a growing demand for homes right across the UK. This should encourage buy to let property investors who have perhaps been sitting on the sidelines of late awaiting developments.
In a blatant threat to overly aggressive talks with the European Union, Theresa May suggested that the UK may look at its levels of corporation tax if an acceptable deal was not possible with the European Union. The idea is that the UK would have direct control of corporation tax and be able to undercut European Union counterparts thereby attracting large multinationals to the country. This in turn would starve the European Union members of much-needed tax income and employment opportunities. The way in which Theresa May delivered her speech this would seem to be no idle threat!
The UK property market has had a difficult few months since the Brexit vote although slowly but surely more details of the U.K.’s future negotiating tactics are being released. Investment markets are now able to look forward and re-evaluate the situation and, bearing in mind human nature tends to overreact in times of uncertainty, Theresa May’s speech today should help to calm nerves. However, it will be very interesting to see how the UK property market reacts in the short to medium term and indeed whether overseas investors still see the UK as a safe haven going forward.