Figures released recently show that the UK economy has grown 0.5% since the Referendum. The property industry has emerged unscathed and even seen strong growth despite the warnings.
The figure for July to September was down from the 0.7% growth recorded in the second quarter of 2016 - the months before Britain voted to leave the European Union but this doesn’t tell the full story. The report shows figures more robust than many economists had expected, and stronger than the 0.2% forecast last month by the Bank of England.
The higher-than-expected GDP figure was driven by the services sector which accounts for more than 78% of the UK economy and grew by 0.2% in the three months to September. It helped to offset a 1.4% drop in construction - the steepest fall in the sector since the third quarter of 2012. Manufacturing was also down 1%, while production fell 0.4% and agriculture slipped 0.7% in the third quarter.
There was a mixed reaction from businesses, who claimed the figures were heartening but warned of the need of an ambitious, pro-enterprise agenda to lift productivity across all sectors. The surprising resilience of the UK economy in the third quarter will cast doubt over the Bank of England moving to cut interest rates in November. British households are likely to be feeling the pinch from rising inflation which hit its highest level for nearly two years in September, at 1%, and is expected to rise further as the plunging pound ramps up costs.
In further good news for the UK, Nissan plans to turn its Sunderland factory into one of the biggest car plants in the world, producing two new models, after gaining “support and assurances” from the government about the UK’s withdrawal from the EU. The agreement will safeguard the future of more than 7,000 jobs and deliver what will be perceived as a major boost to the economy after the referendum.
As construction drops off, house building and residential off-plan developments have remained strong with good capital growth and strong yields for those with an existing portfolio. Indeed, it is likely that more and more people will look to safeguard their wealth in property through these uncertain economic times, thereby pushing house prices up further.
The falling pound has proven particularly attractive to foreign investors who are making the most of the current economic situation and pouring money into the UK property market. Demand for high quality rental accommodation remains very high, particularly in the Northern Powerhouse cities, providing investors with reliably high rental yields on top of the opportunity to earn significant capital gains.
Buy-to-let property investment has been one of the success stories of an otherwise up-and-down economic story and there is every indication that the market will continue to grow and grow.