The months of build up to this decision have been tumultuous and often uncertain. And with Prime Minister David Cameron announcing he will step down by October, and the Pound weakening to 1985 levels, it’s fair to say the result has created some short-term shockwaves.
As the dust settles in the coming days and weeks, we believe there are still many reasons to be positive about the country’s prospects in the months and years ahead. We remain confident about the UK’s ongoing status as a property investment hotspot and will continue to prioritise British markets such as London, Manchester and Liverpool within our investment portfolio.
What happens next?
It will now be largely business as usual, with no immediate shift in the UK’s status within the European Union (EU) while negotiations begin to plan next steps.
The negotiations are likely to result in Britain establishing an alternative relationship with the EU bloc that will enable the two parties to continue to enjoy effective trade and political ties outside of British membership. Examples of this in practice can be seen in prosperous countries such as Switzerland and Norway.
The UK government will move quickly to present a united front and bring certainty and calm to the market, using every power and lever to encourage continued foreign investment and maintain economic growth in the medium to long term.
What does this mean for the UK property market?
We expect any turbulence to be confined to the short-term, and remain confident in the long-term trajectory of the UK property market. This short-term turbulence may even present an opportunity – with a weakened Pound and modest market correction providing a chance for foreign investors to purchase very competitively-priced assets in the UK.
The investment case for British property is reinforced by a number of factors that will not change as the country withdraws from the EU.
Firstly, domestic buyers drive property demand trends. British owner-occupiers are responsible for the vast majority of purchases of UK property, and these buyers will still be ready and willing to join or reposition themselves on the property ladder. This is especially true given interest rates that are now very likely to remain low, or even be reduced further as the government targets stability.
We also believe demand for well-located properties in Britain will continue to grow once the initial shock of this result dissipates. Investment in Outer London and regional cities such as Manchester, Birmingham and Liverpool still boast excellent investment drivers, and it’s possible we may also see a resurgence of demand in prime central London.
Another factor to consider is the implications for the free movement of trade and goods between the UK and EU in future. A further shortage of labour and an increase in the costs of imported materials would further exacerbate the existing national housing shortage. Such further constraining of supply in the years ahead would of course be a positive pressure point for property price growth across Britain.
Despite the uncertainty of recent months, IP Global Senior Investment Manager Hamish Pound remains confident about the viability of British property investment in the wake of the country’s decision to withdraw from the EU.
“As we saw in the lead up to last year’s General Election in the UK, some property investors have taken a cautious ‘wait-and-see’ approach, preferring to hold off on buying until there is a more concrete prognosis. Others have taken the longer-term view that demand for well-located property in the UK will continue to grow, regardless of the referendum’s outcome. It will take time for investors to regain comfort, but we have confidence in the resilience and strength of the UK market in the longer-term.
In the medium-to-long term the UK will remain one of the world’s strongest and most secure economies. In our view, the longer-term trajectory for the UK property market is onward and upward, with some turbulence in the immediate term.”