What could Brexit mean for the UK property market?

Jerald Solis, Business Development and Acquisitions Director, Experience Invest

Asit heads turbulently towards Brexit, the UK has had to overcome another series of political hurdles already this year; Theresa May’s Government recently faced and survived a no-confidence vote, which followed a crushing defeat for the Prime Minister as MPs overwhelmingly rejected her proposed withdrawal deal.

Without a clear plan for the country’s departure from the European Union on 29 March, speculation remains rife about what Brexit will mean for the economy and investment markets.

Those keeping a watchful eye on property sector, for instance, are naturally apprehensive about what 2019 will mean for bricks and mortar. For decades it has been a popular avenue for international and domestic investment, but will UK real estate be able to hold onto its status?

If recent performance is any indication, we should have faith in the property market ability to weather the storm. Indeed, the long-term outlook for the market remains positive, with Savills predicting that average UK house prices will rise by nearly 15% between 2019 and 2023.

So for those looking to invest in property in the coming year, what are the most important trends to consider?

Steady property price growth

Talk of political and economic uncertainty has been dominating public discourse since the 2016 EU referendum; meanwhile, ominous property market forecasts in the wake of the vote warned of a sharp decline in the value of UK houses.

In a testament to the ability of the property market to adjust to significant changes, house prices have, in fact, continued to grow – albeit at a slower rate in some areas – since June 2016.

According to Halifax’s House Price Index, the average price of UK houses increased by 1.3% in 2018. Tellingly, house prices rose by 2.2% in December, the highest monthly rate of growth in almost two years – and importantly, this comes amidst increasing political turmoil in Westminster.

Yet looking at the UK as a whole can be misleading because, of course, not all regions have experienced sustained growth. London, for one, saw house prices contract by 0.4% as affordability and Brexit uncertainty put pressure on the market.

Beyond London, however, other regions across the country have been attracting strong interest from property investors and are, in turn, benefitting from impressive house price growth. Measuring house prices in the 12 months leading to October 2018, Hometrack’s UK Cities House Price Index revealed strong performance in Leicester, Liverpool and Cardiff, at respective 7.7%, 6.0% and 4.6%.

Supported by strong student populations and growing business hubs, regional cities such as these have become key property hotspots for property investors looking to take advantage of growing house and rental prices. It is a trend that property investors ought to watch over the year ahead.

The rise of regional hotspots and commuter towns

Benefitting from private and public sector investment alike, places like Manchester, Liverpool and Luton are experiencing great improvements in their infrastructure and transport links. This is enticing those looking for opportunities outside of traditional property hotspots like London, where house prices are far higher and rental yields have shrunk.

Liverpool, for example, is currently benefitting from an influx of government investment as part of the Northern Powerhouse strategy; the results are clear – over the past five years, house prices have grown by nearly 25%. Meanwhile, as demand for residential properties and student accommodation increases, the city is projected to experience house price growth of 5% in 2019.

Meanwhile, as affordability issues in London take a toll, workers employed in the city are increasingly looking for opportunities outside of the capital – fuelling the growing attraction of commuter towns like Luton. And given the current £1.5 billion regeneration currently taking place in Luton, this commuter town is likely to remain a popular destination for property investors in the coming years.

More new builds 

One of the biggest challenges currently facing the UK property market is an imbalance in supply and demand – put simply, there are simply not enough houses to meet strong demand.To address this pressing issue, the Government has pledged to build 300,000 new houses a year by 2022.

This is certainly good news for property investors seeking their next buy-to-let opportunities; particularly given the growing demand for housing in regions like the Midlands and North East, the construction of new building and developments will be a priority over the coming years.

In line with the push to build more houses and flats, investors will see a rise in the number of off-plan investment opportunities emerging across the country.This is another important trend to watch, especially as many of these properties are designed as ‘build-to-rent’ developments. In fact, this sector has grown five-fold since 2013 according to the British Property Federation.

Long-term projections 

Given the historic resilience of the UK property market, and particularly its resilience in the wake of both the Global Financial Crisis in 2008 and EU referendum in 2016, Brexit is unlikely to unsettle investors’ long-term interest in British real estate. Certainly, the withdrawal is sure to present some initial challenges; however, those looking to benefit from property investment over the years ahead should keep an eye out for promising opportunities that are emerging beyond London and outside of the traditional housing market.

Jerald Solis is the Business Development and Acquisitions Director at Experience Invest, a company that provides property investors in the UK and overseas access to exclusive investments across a variety of asset classes. He is also a Director at Opto Property Group; a construction firm committed to creating developments that have a long-term, positive impact.