Despite signs that the UK electorate are growing tide of MPs inability to tackle Brexit, it does not look like the situation will be solved in the short to medium term. Voters after vote, defeat after defeat and while many have no idea how Theresa May is still standing the UK government is somehow still intact. Against this background, should Brexit influence your property investment strategy? The simple answer is, yes and no. We appreciate that is not very helpful…
Brexit should influence your investment strategy
The reasons why Brexit should influence your investment strategy are in the main purely a matter of timing. You should consider issues such as:-
• Economic growth could be impacted in the short term
• Reduced investment by UK companies is not helpful
• Reduced economic growth will not help wage growth
• Will the UK become the pariah of Europe?
As it stands, there is no doubt that the UK’s reputation around the world has been reduced to something of a laughing stock. As the Prime Minister once said, Parliament continues to tell me what they don’t want but what do they want? Well, they were asked earlier this week and the eight options were all defeated….
In the longer term, there is no reason why the UK economy should not prosper under WTO rules which allow continued trade with the European Union but with tariffs. The UK also has the ability to negotiate its own trade agreements with countries around the world which will open up new markets. Indeed, we have already seen the UK government “rollover” many European Union trade agreements in readiness for a no deal Brexit.
Brexit should not influence your investment strategy
There are many misconceptions as to why Brexit could have an impact upon the UK property market. If you look at the simple supply/demand ratio then yes, there could be reduce demand in the short term due to all of the uncertainty. However there are a number of issues to consider in the longer term such as:-
• Free trade agreements with countries around the world
• An eventual deal with the European Union
• Continued net migration into the UK (often ignored by the press)
• A growing UK population leading to a growing demand for private rental properties
• Cheap finance is likely to be available for some time to come
When you take a look at these issues and the long-term prospects of the UK property market, things begin to look a little better. Yes, we appreciate that the short-term uncertainty surrounding Brexit will not help investment decisions and businesses will likely suffer. However, there are few who could argue against the idea of short-term pain leading to long-term gain.
One issue which is often overlooked is the fact that even when free movement ends, there will still be net migration to the UK. Even those from the European Union (after the UK leaves) will be able to move to the UK under transitional rules and then via the immigration system the UK uses for the rest of the world. The idea that EU citizens will avoid the UK after Brexit is a major red herring.
If you look at the situation in the cold light of day, Brexit offers more long-term positives than it does negatives. There may well be short-term concern, confusion and reduced investment in business and the property market, but longer term the UK is likely to prosper again. After all, let’s not forget that many countries around the world do not have a formal trading arrangement with the European Union but they still survive and prosper. Why should the UK be any different?