Interview: 7 Post-Brexit Property Predictions

Interview with Steve Povall, Managing Director of Residential Estates.

Forecasting is notoriously difficult unless experience and past history is available to guide us. Steve Povall, Managing Director of one of the UK’s fastest growing property sales, investment and management firms, Residential Estates, is a property expert with more than 25 years’ experience in the industry.

In this interview, Steve attempts to answer the seven most important questions about the effect of Brexit on the UK property market in the short and medium term.

1.    Do you think Brexit will turn out to be a good or bad thing for the UK property market?

Obviously there is a lot of media attention and speculation about what will happen to all sectors of the economy now that we have decided to leave the EU.

In the context of history, we can look back to the early 70s where I remember similar levels of opposition to Britain joining what was then the EEC. If you look at the historical evidence from that time, house price growth remained in double figures and we didn’t see any housing market crash.

While we cannot predict what will happen in the short term, the fundamentals of the market haven’t disappeared overnight. Demand still massively outweighs supply and this could be compounded further if property developers hold back on releasing new projects.

2.    What will happen to property prices in the UK, now, and when the UK finally leaves the EU?

I expect to see some softening of house prices in the short term while the country digests this once in a lifetime event but I certainly don’t expect to see a slump. The government is telling us that it will be two years before negotiations on leaving the EU are complete.

This isn’t ideal as I think it creates that lingering sense of uncertainty among investors and home buyers. I believe this lack of confidence will ultimately prove to be unfounded and I expect house prices to continue to grow at a moderate pace while supply outweighs demand. It’s impossible to say by how much at this stage.

3.    What impact will the fall in the value of sterling have on the UK property market?

While there have been plenty of scary news headlines about the fall in the value of sterling, this could actually be a good thing for the UK economy in general. It makes our exports more competitive and this will actually help companies that rely on export markets to grow.

Another less talked about effect of currency fluctuations is property becoming cheaper in the UK for overseas investors. Many experts are predicting that the appetite for property in London will be diminished by Britain leaving the EU. This is unlikely when it has to be remembered, London was seen as a safe haven during the financial crisis. Nothing much has changed since then, London is still one of the world’s leading financial sectors and the UK economy is more than big enough to stand up on its own.

4.    How do you expect Brexit to affect the appetite for investment in UK property domestically?

There are a lot of investors from the UK adopting a wait and see approach. We are naturally conservative as a nation, which is why this result came as a bit of a surprise.

The uncertainty will inevitably put some people off with investors being cautious about what happens next. Unfortunately, it will soon become apparent any money that isn’t invested will begin to lose a lot of its value if the decline in the value of Sterling continues. Property is a hard asset which will always appreciate in value in the long term.

5.    Will Brexit deter foreign investment in UK property?

Quite the opposite. As a foreign investor, now is an excellent opportunity to purchase UK property, particularly at the cheaper end of the market. Student property remains a strong investment as student numbers increase from both the UK and abroad at the country’s most prestigious universities.

6.    Student property has seen of the best return for investors in recent years, do you think this market will be affected by Britain’s decision to leave the EU?  

While freedom of movement might be an issue in the future, I think it is unlikely to have an impact on the demand for student property in the UK. Students from the EU may see their fees for studying in the UK increase in line with non EU students. The reality is, students from the EU only account for 5% of demand for student property in the UK.

7.    Should investors adopt a wait and see approach before investing in property?

Investment and caution are not easy bedfellows. There is always a risk attached to investment no matter what it is. Simply waiting for the bad news to blow over could be a mistake, particularly when, as I said earlier, the value of money held in sterling is being eroded as we speak by inflation. As the billionaire investor Warren Buffett says, ‘Be Greedy When Others Are Fearful’.