Jerald Solis, Business Development and Acquisitions Director, Experience Invest
The Brexit deadline has been pushed back once again, for the second time in under a year. If all goes to plan, the UK is now set to withdraw from the EU on 31 January, unless a deal is agreed and passed through Parliament ahead of this date; an unlikely scenario, given that parliament has been dissolved ahead of the general election on 12th December.
However, there is one silver lining: this extension offers UK industries some extra time to set out preparations for the coming months and years.
One key sector that has been under significant scrutiny since the 2016 referendum is the property sector. Despite initial concerns among industry commentators that Brexit would hamper house price growth and ultimately damage the market, the property sector has in fact fared well in response to the major political and economic transition. Granted, some parts of the market have slowed or dipped slightly, however prices on the whole have held firm or, in many regions, risen steadily.
Importantly, investor confidence in the market does not appear to have faltered either, with demand for UK housing remaining consistently strong. Naturally, however, Brexit has caused some investors to put their plans on hold while the details of the deal are ironed out: 55% of the UK property investors Experience Invest recently surveyed have paused their investment plans over the past six months as they await the outcome of Brexit. In spite of this, long-term confidence in the resilience of the real estate market remains steadfast. Only 31% think that leaving the EU will negatively affect the value of their property portfolios.
These figures offer a promising outlook for the future of the property market. That is not to say, however, that it will not face hurdles throughout the transition period. The question we must now ask is: how can stakeholders in the industry best prepare for the near and longer-term future?
Perhaps one of the biggest concerns facing the property market today is the shortage of skilled workers. And with a significant proportion of the construction sector’s skilled workforce coming from the EU, the capacity to develop new residential sites at a pace that effectively meets demand has been called into question. An estimated 7% of workers in the construction industry are EU nationals, with this number jumping to over a quarter (28%) in London.
The industry must therefore focus on directing resources towards supporting the skills needed to deliver house building. For instance, this could mean encouraging developers to work hand in hand with local councils to create and support construction apprenticeships in order to attract more talent. However, the overall focus must be on giving prospective and current workers the opportunity to develop their skills and experience.
Addressing the housing crisis
Brexit has long dominated the political agenda, which means that other important government priorities, such as the ongoing housing crisis, have not received as much attention as is needed to deliver effective solutions. So while it’s important to make the final preparations for the UK’s withdrawal, we also cannot ignore the stark imbalance between housing supply and demand. The general consensus suggests that the UK needs to be putting 300,000 new builds onto the market on a yearly basis by the mid-2020’s if we hope to redress this balance. In 2017/2018, however, only around 222,000 new homes were added to the housing stock.
Given this slow progress, there are fears that this target is too ambitious. Meanwhile, Brexit will naturally make the challenge even more complicated, creating more obstacles for construction companies attempting to meet current targets through new-build development.
The industry must therefore work together with the government to ensure that the housing crisis remains a top priority. Naturally, this will entail supporting and attracting skilled workers, however, it also means diverting more resources towards the construction sector and thinking creatively about how else the nation’s house-builders can be buoyed. One solution that should be explored is encouraging private investors to support house-building efforts; a partnership between investors and developers could help bankroll building projects and ensure that we continue to deliver quality housing.
It goes without saying that Brexit will present new challenges for the property sector. But give its historic track record of resilience, this does not mean that these must necessarily hamper the continued growth of the industry. Rather, it means that stakeholders in the industry must think carefully about the obstacles that could arise and make preparations to minimise potential disruption.