Whether you’re an investor or buying a home, purchasing property is always significant investment. With this in mind, there’s lots of uncertainty over what Brexit means for the UK’s usually buoyant housing market.
It’s likely that the chronic supply imbalances that persist in the UK – not enough supply to meet demand – and the weakness of the pound should help limit any sharp drops in prices and activity, according to some commentators.
Property experts from one of the world’s oldest private banks, Coutts, recently published an advice note which contained its views for UK property in the immediate wake of the Brexit vote. In it, Coutts said that while any possible long-term changes wouldn’t become apparent until article 50 is invoked and Brexit negotiations begin, in the short-term, volatility would be a natural consequence of the uncertainty created by the largely unexpected EU referendum result. That volatility includes a drop off in activity as investors and property purchasers reflect on the situation and their own position while Brexit may also be used as a bargaining tool by some to buy property “at a reduced price”, Coutts said.
The bank also added, however, that due to the landscape of the UK’s housing market, where not enough homes have been built for a number of years, leaving too few homes available for the size of the population, price falls should be limited.
“The main market dynamics of supply and demand remain; there is a fundamental lack of supply which will help provide a floor under prices,” Coutts said in its note.
Coutts did warn, however, that potential investors need to exercise caution when it comes to buying rental properties. That’s because in London, there are a number of apartment developments that are coming to market at the same time, which could have an impact on rental prices.
The Bank added that sentiment was likely to remain uncertain over the summer despite expectations of Bank of England (BOE) rate cut and that September should begin to provide a truer indication of where prices sit and how investors and purchasers are feeling about UK property.
Private luxury property firm Coldwell Banker echoes a number of these views in an interview with the UK’s Express newspaper.
One Coldwell Banker partner in the company’s Southbank branch said the current uncertainty around prices was leading to both buyers and sellers delaying decisions over property.
“Brexit has certainly caused a lot of turbulence in the markets,” said Bernadette Teuma. “We haven’t seen a flood of property come onto the market nor a flood of buyers as people are being cautious.”
Ms. Teuma added that BOE support should help keep mortgage interest rates low which would help UK mortgages remain affordable for potential buyers. And, for buyers who are in a good financial position, particularly overseas buyers with dollars to spend, she said that deals are certainly available.
The two sets of experts are in broad agreement that the current period of uncertainty being experienced across the UK’s housing market is unlikely to last and that the fundamental lack of supply should keep prices from falling too far. Of course, it’s still too early to have any real idea of what the future holds for UK property prices, but at the moment, caution is the watchword.