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Comment: Property investment suffering from Brexit uncertainty but what next?

15 October 2019

Brexit is holding people back from property investment. Clarity is urgently needed, says Jerald Solis, director, Experience Invest.

Like many of my colleagues in the property market, one cannot help but feel an underlying sense of frustration when looking at the government’s attempts to manage Brexit. Ongoing divisions between and within the major political parties has led to a stalemate in Westminster, and with the 31 October deadline edging nearer, we’re still no closer to understanding just what might transpire over these coming weeks.

While current indicators suggest the UK economy is slowing down, I doubt this will be a long-term trend. Rather, businesses, investors and consumers in the UK seem to have adopted a ‘wait and see’ approach, deferring significant decisions and waiting to see just how Brexit will play out.

This is something that rings particularly true for UK-based property investors. Recently, Experience Invest surveyed over 1,000 property investors to find out just how Brexit has impacted their financial strategies. The results were significant – we found the majority of UK property investors have paused on their investment plans over the past six months as they await the outcome of Brexit. Moreover, 37% have taken a listed property off the market due to a slowdown in activity.

Property investors are nonetheless keen to take advantage of future real estate opportunities should they arise, with 52% currently closely monitoring properties they are interested in purchasing. Importantly, the UK boasts an expanding range of investment opportunities to suit the needs of all types of prospective buyers, be it a first-time buyer after a new-build property to investors seeking to expand their real estate portfolio.

Investors want certainty before they commit

Investors are eagerly observing the performance of the real estate market, and this begs the questions – when will confidence return to prospective buyers to ensure they can confidently seek out new acquisitions? Are they playing the short or long-term waiting game?

To provide timely insight into their future intentions, Experience Invest posed this very question to our sample of property investors and the results were enlightening. Of those surveyed, over half (51%) anticipate a surge in activity within the property market once the 31 October deadline passes. What’s more, just three-in-ten think leaving the EU will negatively impact the value of their property portfolios.

Interestingly, Halifax’s latest house price index found that UK house prices had risen by 1.1% in the year to end September 2019. While this is the slowest rate of house growth recorded since April 2013, these findings don’t tell the full story when it comes to understanding the long-term capital growth of UK real estate. For example, if we look at the estimates provided by the Office for National Statistics ten years’ ago, the average house price in September 2009 was £165,314. A decade on, Halifax estimates this now stands at £232,574. Regardless of asset class, this gross value increase is impressive, particularly given the political and economic events that have transpired during this period.

Brexit is offers opportunities for international investors

Since the EU referendum in June 2016, the value of the pound has fluctuated significantly. While this has been a concern for some in the property industry, it has conversely been seen as a window of opportunity for international investors, particularly those seeking buy-to-let investments. Whereas in the past, UK real estate would have been seen as prohibitively expensive, the falling value of the pound has increased the purchasing power of those based in MENA, North America and Asia.

This is partly the reason why there is always a strong presence of UK property investment firms at international expos and exhibitions, ensuring that foreign investors can buy off the plan property quickly, and in doing so, take full advantage of the pound’s fluctuating price.

There has been a great deal of speculation about how Brexit will impact the UK’s property market. Since the referendum, however, while some parts of the market have slowed or dipped slightly, prices on the whole have held firm or, in many regions, risen steadily.

Nevertheless, Experience Invest’s research clearly shows many property investors are now adopting a ‘wait and see’ approach as the Brexit deadline draws near. And this means there could be a surge of activity once Brexit materialises; once the dust settles, investors are evidently preparing to spring back into life, which could result in far greater activity across the UK property market. I look to the coming months with anticipation and interest.

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