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How will Brexit affect the UK property market?

An image of a union flag

“After a roller coaster ride, we now know the outcome: Britain is set to leave the European Union. So how will this momentous decision affect UK property? Let’s look at the underlying factors:”

A fundamental supply and demand imbalance
“Britain simply doesn’t have enough homes. Supply is constrained by things like planning rules, lack of public investment, skills shortages, even the availability of raw materials. Demand is further boosted by domestic population growth and the low cost of borrowing. This simple disconnect between supply and demand has driven prices and will continue to provide upwards pressure over the medium to long term.”

Housing resilience
“In periods of uncertainty, residential property has historically outperformed other asset classes – in addition to the attractive income stream it provides. During even the Global Financial Crisis for example, UK house prices strongly outperformed the FTSE all-share index. Unlike other asset classes, far fewer people are willing to sell residential property in uncertain times, which in turn further reduces supply and eventually provides upwards pressure.”

Income for the long term
“Property provides an attractive income. The average tax efficient net dividend yield on our platform for example is currently six times the Bank of England Base Rate, with some properties providing up to ten times that amount.”

Interest rates set to remain low
“With UK households heavily burdened by debt, any increase in interest rates would put further pressure on the economy. Many believe that Brexit could even place downwards pressure on interest rates, and economists at JP Morgan have forecast borrowing costs could fall to zero by August. Speaking at a recent Property Partner event, Chief Investment Officer of Coutts Bank, Alan Higgins, echoed Mark Carney’s comments that ‘rates will be low for long.’”

Infrastructure investments continue to transform areas
“Major transport infrastructure and regeneration projects such as Crossrail and town/city upgrade investments will continue to positively influence prices and outperformance in adjacent areas.

So, while “Leave” has won the day, we believe that for the UK housing market the watchword is “Remain”. It is going to seem like a helter-skelter for all markets for the next few months, but the medium and long-term prospects for UK residential property remain strong. In the end, people need somewhere to live.”

Daniel Gandesha
Founder and CEO of Feefo

How will Brexit affect the UK property market?
By David Price