David Cameron is currently attempting to renegotiate the U.K.’s relationship with the European Union amid plans for an in/out referendum probably sometime in 2016. Over the next few months we will see an array of propaganda in the media channels as those in favour of remaining part of the European Union highlight the benefits. There is also a growing momentum behind the argument for the UK exiting the European Union with those in favour of this particular stance highlighting a number of anomalies with the EU/UK relationship. So, would an exit from Europe harm the UK property market?
Is there safety in numbers?
As we saw during the 2008 worldwide economic collapse, to a certain extent there was a feeling of safety in numbers with regards to European Union partners working together. The collective strength of the European Central Bank together with leading lights such as Germany, the UK and France certainly helped to steady the ship during difficult times. However, the Greek issue highlighted the fact that one struggling member of the European Union does have the potential to bring down the whole project.
As a consequence, and we will hear more about this from those in favour of exiting the European Union, there is concern that the UK is funding weaker partners. An exit from the European Union would see an immediate increase in the UK budget due to the fact the UK pays more into the European Union than it receives in direct funding.
When the UK government of the day refused to take up the offer of the euro many European Union partners treated this decision with tremendous disdain. The UK authorities were ridiculed, lambasted and ignored for some time but who is the winner today?
The extreme volatility of the euro puts the British pound in good light and would seem to rubberstamp the government’s decision not to join the currency. This in itself has created an atmosphere where international property investors feel more comfortable acquiring property in the UK. To all intents and purposes at this moment in time an investment in UK property by international investors avoids the volatile euro but still offer some exposure to the underlying European economy. Is this perhaps the best of both worlds for international property investors?
The future of UK property
While the doom and gloom merchants would have you believe that the UK would be cast aside as an international pariah if it decided to leave the European Union, is this really the case? The UK is the largest importer of European goods and services, has a strong underlying economy and perhaps the property market would actually benefit if the authorities had more control over their spending?
There are obviously reasons for maintaining membership of the European Union but in reality, whether the UK remains or leaves, this is unlikely to have any major impact upon the UK property market. International investors constantly wax lyrical about the UK real estate market – is this really likely to change in the foreseeable future?