How has Brexit impacted property investment in the UK

By Bridging Loan Directory 14th October 2019

It has been over three years since the EU referendum, yet it appears no one is any wiser as to what a post-Brexit UK will look like. Whether you voted to leave or to remain, whether you have unshakable confidence in the government’s ability to negotiate a deal with the EU or not by the 31^st October, it is impossible to predict with any real degree of certainty what is going to happen over the coming weeks.

In the face of uncertainty, most people are understandably reluctant to make major decisions, and property investors are no exception. Indeed, a survey of 1,000 UK-based homeowners and property investors by Experience Invest has revealed that over half (55%) of UK property investors are putting major investment decisions on the backburner as they await the outcome of Brexit. With investors sitting on the fence, what does this mean for the future of UK property investment?

Delicate nerves of investors

Certainty and evidence-based decisions are the foundations of any investment, whether the investment is in property, or stocks. However, with the UK plunging into the unknown, investors are inevitably spooked. It is unsurprising, therefore, that Experience Invest’s aforementioned research revealed that nearly two thirds (59%) of property investors are eager to see the government’s 2019 Autumn budget taking place before making any major financial decisions. However, the fact that no date for the budget has been announced will do nothing to settle nerves.

Adding fuel to the fire are the multitude of conflicting news stories emerging every day, claiming either that Prime Minister Boris Johnson is painstakingly close to achieving a deal with the EU or the UK will come crashing out of the EU without a deal on 31^st October. Perhaps it is unsurprising, therefore, that 56% of those surveyed don’t believe that Boris Johnson will successfully deliver Brexit.

With investor confidence being continuously knocked, market activity has slowed dramatically. Indeed, with Experience Invest’s research revealing that almost two fifths (37%) of investors have taken listed properties off the market due to the deceleration of activity. Consequently, the question is this: will this slow down stretch beyond 31^st October.

Poised for action

Long-term inactivity seems to be an unlikely scenario. Experience Invest discovered that nearly three fifths (59%) of investors are yearning to do more with their money, especially since interest rates have remained below 1% for the past decade. One could therefore suggest that, despite some insecurities, investors are keen to resurge market activities in the near future.

For now, however, it appears that many investors are restraining themselves and adopting the tried and tested “wait and see” approach. Indeed, Experience Invest’s research highlighted that over half (52%) of property investors are merely monitoring properties of interest, waiting to make a financial commitment until they gain a bit more clarity.

Whilst the “wait and see” approach might cause frustration across the industry, investors remain poised for action. Encouragingly, the patience of the industry will be rewarded, with over half (51%) of property investors believing there will be a surge of activity in the immediate Brexit aftermath. This expectation certainly seems probable, given widespread predictions from economists and market commentators that property prices will drop once the UK leaves the EU before once again recovering after a period of readjustment. During this time, it would not be surprising to see investors suddenly descend upon potentially undervalued properties.

Despite the predictions of falling property prices, a key concern for investors will be whether the market will recover. After all, whilst low property prices may be desirable when making the initial investment, the main concern at the forefront of most investors’ minds will be whether their venture will make a profit.

Resilience of the market

However, Experience Invest’s research instils confidence in the future of property prices. The majority (69%) of property investors we surveyed don’t believe that Brexit will have a negative impact on the value of their property. This is incredibly encouraging; confirming confidence in the future of the market will ensure that the slow-down in activity is, in fact, a momentary lapse in an otherwise resilient market.

However, for the 31% of investors, who remain nervous about the value of property prices, I would like to offer an olive branch of reassurance. Whilst monthly housing statistics highlight the immediate negative impact of Brexit, prices on the whole have remained steady. In places like Luton, Newcastle, Liverpool, Manchester and Cardiff, prices have even risen steadily.

It is easy to become swept up in what seems to be a constant stream of negative press. Investors must remember to take a step back and consider the bigger picture. It is encouraging to find that the majority of property investors seem to be doing just that. Whilst we may have to endure a few more months of uncertainty, we can be reassured by the strong probability that, once the dust settles, property investors will spring back into life. After all, there’s a reason why the UK is considered a top destination for real estate investment.

Jerald Solis, Director, Experience Invest