How will Brexit affect property investment?

In the early hours of Friday morning confirmation came that the Great British public had taken the momentous step of voting to leave the European Union. The vote went against most expectations, despite the polls suggesting it was on a knife’s edge and what ensued after this was a total unknown.

How will Brexit affect property investment?

The Prime Minister David Cameron resigned within hours, and both Sterling and the FTSE 100 went into temporary free-fall. On the face of it things started to look grim for the UK economy and its immediate future. There are, however, positives emerging from a raft of uncertainty.

Not for the first time, and certainly not the last, property emerged largely unscathed from the ambiguity as the safe haven that cash-rich investors require in times like this. As the FTSE fell off a cliff and the pound plummeted, people were already starting to look at property markets outside of the capital to continue to earn above bank interest rates, and seek modest capital appreciation.

The result to leave the EU has only increased the cloud of uncertainty cast over the British property market, but it is not the time to sit back and watch the events unfold. Now could well be the time for buy-to-let investors to turn their attention away from the capital which could experience difficult times ahead in terms of economic and currency uncertainty. Cash rich investors should instead look to the Northern Powerhouse, which still remains a strong contender for those seeking to protect capital and produce an income well above bank interest rates. Many still expect prime London prices to continue falling and many of the tens of thousands of luxury homes in the pipeline to be mothballed as demand from all over the world fails to meet that potential level of supply. The rest of London could be hit by a perfect storm of several factors hitting house prices which is great news for house-buyers but not for investors and homeowners. The rest of the country, however, is likely to be far more stable and we can expect house prices to be very slow to react, if at all, as a minor economic slow-down is balanced by low mortgage interest rates and huge demand for housing. Rents outside London will remain strong and continue to grow steadily, created by a modest reduction in house building as the banks reduce lending again.

This is echoed across the industry as many UK investors haven’t changed their long term investment plans in the Northern property market and most experts are predicting minor, if any, changes to house prices over the coming months and years. Certainly it appears uncertain and rocky times ahead for anybody looking to invest their money in shares as the market seems to be in the midst of wild swings. Predicting the performance of shares which, broadly speaking, are reliant on performance across Europe and the wider world is much more difficult than predicting the short and long term performance of a strong and resilient UK property market.

In short it’s difficult to definitively say exactly what will happen from here but based on the evidence and the advice of experts UK property remains a safe long term investment for those concerned about the stability of their wealth. In times where nothing can be sure, property investment could be said to be ‘as safe as houses’ as it is possible to be.

Manchester Guide vertical - April 2019

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