In the wake of the EU Referendum result, the financial effects have rippled across global markets and shaken the confidence of investors. Trust in the pound initially eroded away and at one stage, sterling had dropped more than 10% to below the $1.33 mark- its lowest level since the mid-1980s.
However, this short term slump was largely expected by the majority of political commentators as markets adapt to the monumental change. Over time, confidence in the pound will return as issues such as the next Prime Minister and finalisation of Article 50 become clear.
When it comes to property, experts don’t feel too worried at all about the potential effects of Brexit. The general consensus is that the supply and demand of housing will stay the same as it would have done with a Remain vote.
In fact, although some will consider this a period of uncertainty, other indications show that investors aren’t planning to pull out on existing deals because of the result. The demand for homes is still healthy.
Respected estate agents have had their say on the matter, such as Russell Quirk of eMoov, who has stated:
“Going forward the UK market will go from strength to strength, perhaps with wobbly knees as it emerges from the clutches of the EU, but it will soon find its feet again… Property values increased by 6% over the course of 2015 and we predict the same rate of growth by the end of 2016.”
Although the housing market will settle in time, property prices still may drop in the short term. This could be the opportunity many first-time buyers are looking for, allowing them to take their first step on the property ladder. Those with the sufficient capital could in fact find the Brexit decision a fantastic buying opportunity.
Foreign investors may also be licking their lips at the initial drop in the pound, using foreign currency to make investments. Peter Wetherell, a Mayfair estate agent, has noted that:
“For overseas buyers, a big drop in the value of sterling will effectively offset the stamp duty and tax adjustments, and make prime London property a lucrative investment… Dollar-based Middle East and Asian investors in particular will look at short-term buying opportunities in central London.”
Likewise, Mark Hayward and David Cox, managing directors of the NAEA (National Association of Estate Agents) and ARLA (Association of Residential Letting Agents), have quoted:
“We believe that the UK housing market is resilient, as is the supply chain that drives it.”
The long-term effects of the Brexit result won’t be made clear until the process underlined by Article 50 comes into force. Until then, estate agents are urging homeowners and prospective buyers not to panic at the UK’s decision.
Many analysts believe that, despite the initial shock, long-term gains are more than likely. Within a few months, the shape of the housing market will become clear although the general feeling is that house prices will do what they have always done – follow the laws of supply and demand.
If you’re interested in learning more about property investment, you might enjoy Sensible Tax Planning for Property Investors.