Volatility Ahead Road Sign

28

June

2016

Volatility Expected in UK Property Market Following Brexit Outcome

A Bumpy Ride Ahead for the UK Property Market?

The UK property market is facing short term volatility due to the decision by the people to vote to leave the European Union, but over the long term experts predict it will settle down and still be attractive.

The main issues seem to revolve around how foreign buyers will react to the leave vote as there had already been signs of a wait and see attitude in terms of overseas investment in property in London in particular where demand and prices were showing signs of slowing.

Ian Westerling, managing director of Humberts, believes that continued uncertainty during lengthy negotiations as politicians thrash out what post-Europe looks like for Britain is likely to keep the brakes on the property market for the foreseeable future.

He explained that people who have to move house will still do so but many investors and less committed buyers are likely to sit tight to see the economic and social impact of the referendum result.

‘Housing market professionals will need to brace themselves for a new norm in market dynamics, underpinned by the ongoing unknowns. The wait and see period could lead to some price adjustments. The onus will be on the Government to act swiftly to avoid the property market becoming paralysed which would have a knock-on impact on the rest of the economy,’ he said.

Adam Challis, head of residential research at JLL, also believes that the London housing market will feel the effects of the decision more deeply. ‘The interconnected trading relationship between London and the rest of Europe means the implications are more complex. This will exacerbate the uncertainty for London’s home owners,’ he said.

In reality, it is hard to know what the full ramifications will be, according to Mark Posniak, managing director of Dragonfly Property Finance. ‘How the Bank of England, the Government, the financial markets and economy react today and in the weeks and months ahead will be crucial to how the property market performs,’ he said.

‘Caution, reduced transaction levels and downward pressure on prices in the months ahead are almost certain but we should not write off the property market. Despite the magnitude of the result, the structural supply issue underpinning the UK´s property market may well prevent prices falling materially,’ he pointed out.

He also pointed out that overseas demand may increase on the back of the decimated Pound. ‘For many overseas investors, buying British property just got a lot cheaper,’ he added.

However, despite the impact of the current state of the Pound on British property investors, there are opportunities to protect capital during this period of economic uncertainty in the UK. In the commercial property sector for example, there is a recession-proof megatrend in office buildings taking place in central business districts around the world.

These offices are known as coworking spaces and are designed to meet rapidly rising demand for more flexible office arrangements for the freelance economy. During times of recession more people than ever take the decision to go it alone and in this digital age, they need workspaces that promote collaboration with others and provide plenty of networking opportunities.

This is currently the high-demand sector in real estate investment and affords investors capital protection over the next few years as the coworking market continues to expand – while other markets continue to contract.

Find out more by requesting a call from one of our experienced advisers.