How will Leaving the EU Affect the UK Property Market? · the result of the EU referendum was...

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UK Property Investment Post-Brexit:

How will Leaving the EU Affect the UK Property Market?

International Investment Post-Brexit:

How will Leaving the EU Affect the UK Property Market?experienceinvest.com 3

This has been a common question since the result of the EU referendum was revealed on 24th June 2016. And it has been a particularly hot topic within the property sector, with British real estate a longstanding, popular asset class among international investors.

On the one hand, there have been concerns that leaving the European

Union would weaken the UK’s financial markets and the value of domestic assets, deterring investors from channelling money into the country.

On the other hand, at the heart of Brexit’s appeal was that leaving the EU would enable the UK to carve out its own economic agenda free from interference from Brussels.

On 31st January 2020, after 42 months of political turbulence and uncertainty, the UK officially split from the EU. So, as the dust settles, what answers can we provide to the question of how Brexit will impact international investment into UK real estate?





How will Brexit

impact the UK’s

global standing as

a hub for finance,

commerce and

investment?



Price growth drives demand for brick and mortar

2.3% 15.3%The fundamental reason for the popularity of bricks and mortar investment in the UK is the long-term price growth of the asset class. Furthermore, the potential for capital growth is coupled with the ability of residential properties to deliver regular income through rental returns.

Between the start of 2010 and the end of 2019, the average price of a UK house rose by £67,000. When one considers that this ten-year period played host to the aftermath of the global financial crisis, four general elections,

three new Prime Ministers and the fallout from the EU referendum, this price growth is all the more impressive.

Uncertainty in the minds of consumers, businesses and investors can be damaging to any financial market. And the past decade has been filled with a significant amount of uncertainty. Yet bricks and mortar demonstrated its ability to withstand these testing conditions and continue an upward trajectory in its value.

In the weeks immediately following December 2019’s general election – in which Boris Johnson and the Conservative Party won an overwhelming majority – the property market experienced the so-called “Boris Bounce”.

According to Rightmove, there was a 2.3% monthly surge in the average price of UK properties coming to the market between 8 December 2019 and 11 January 2020. This signifies the largest jump for that time of year since the company began its records in 2002.

Looking ahead, experts are predicting this positive trend to continue. Savills, for example, has stated that it expects house prices to rise by as much as 15.3% by 2025.

This historic data combined with future projections will likely ensure international interest in UK property investment remains strong.

surge in house price

after general election

house price growth

by 2025 (Savills)

Forecast



pound



Value of thе

Brexit has had a notable impact on the value of the pound sterling over the past three-and-a-half years. This, in turn, is a major influencing factor on overseas buyers of UK property.

Five years ago, £1 was worth $1.54; at times last year it reached lows of $1.2; throughout January 2020 it stood at $1.3.

Simply put, as the value of the pound has weakened against other leading global currencies, it has become cheaper for international investors to purchase UK property. Many leading real estate firms

and finance providers reported that this had resulted in a rise of overseas buyers throughout 2018 and 2019.

Predicting how the pound will perform throughout 2020 and beyond is extremely difficult. However, while its value remains significantly lower than years gone by, there will be a greater appetite for non-UK residents to look to British shores for property investment opportunities.





Lasting appeal of UK as place to live, work and study

From hospitals and schools through to restaurants, museums, galleries and theatres, the UK’s multicultural cities boast a wealth of attractions and advantages that protect their lasting appeal. For some international buyers, it is the prospect of owning a second home in the

UK – somewhere to holiday or use for work – that outweighs considerations around capital growth and rental returns.

Equally, many overseas buyers purchase property in the purpose-built student accommodation (PBSA) space. Sometimes this is

Aside from the economic and financial factors driving

international demand for UK real estate investment,

it is also important to consider the appeal of the

country as a place to live, work and study.

is for a child who is moving to the UK to study at university. Other times it is solely as a revenue-generating investment.

As of 2018 Great Britain and Northern Ireland had 98 institutions on The Times’ list of the 1,250 best universities globally. Unsurprisingly, therefore, the UK attracts a large number of international students.

While there have been some concerns raised over the long-term impact Brexit could have on the UK, the fact that student numbers are rising means that Brexit has not dampened the reputation of the country’s higher education institutions. Moreover, of the international students who study at UK universities, almost three times as many come from non-EU countries (343,000) compared to within the EU (143,000).

According to recent research by real estate services firm JLL, the number of full-time students in the UK is due to increase by 500,000 over the next ten years. And this will bring the need for more PBSA developments into sharp focus.

For international investors, the PBSA sector offers opportunities for rental-generating assets that are – as the above data indicates – likely to be in high demand post-Brexit.



Potential reforms on the horizon



For property investors, perhaps the most important would be changes to stamp duty. The Conservative Party has already consulted on the idea of a stamp duty surcharge of 1% for non-UK residents buying UK property. This position has since developed, with the Government now widely accepted to introduce a large 3% surcharge for overseas buyers.

However, such changes must be put into context. Even after any potential introduction of a surcharge on overseas buyers, stamp duty rates in the UK will still remain extremely competitive, and far lower than many global hotspots when it comes to international real estate investment, including Hong Kong, Singapore, Berlin and Sydney.

The 2020 Spring Budget on 11th March will afford both domestic and international investors a closer look at the Government’s economic agenda. Further tax reforms and legislative changes could be afoot, so it will be important for property buyers of all shapes and sizes to follow the Chancellor’s announcement.

December’s 2019 general election was heavily

focused on the subject of Brexit. But following

the Conservatives party’s emphatic victory, Boris

Johnson and his cabinet now have the remit to

introduce broad reforms.





Experience Invest prepares for international demand

Since launching more than 15 years ago, Experience Invest has witnessed growing interest in UK real estate from investors across the globe. Indeed, that is a major reason for the company regularly attending leading property investment events in Europe, The Middle East and Asia.

Such has been the volume of demand from international investors seeking routes in different pockets of the UK

property market, in 2020 Experience Invest will be taking further steps to bolster its presence overseas.

Experience Invest is to open a new office in South Africa – adding to existing headquarters in London and base in Hong Kong – which will make it easier for prospective clients to learn more about the buy-to-let and PBSA investment opportunities the company has to offer across the UK.

As outlined in this guide, the outlook is positive

for the UK property market in 2020 and beyond.

With prices expected to rise steadily in the years

ahead, and various factors ensuring the continuing

appeal of British bricks and mortar as an asset class,

investor demand is expected to remain strong.



Head office: 43 Palace Street, London,

SW1E 5HL, UK

+44 (0) 207 834 1113

[email protected]

South Africa office:Dock Road Junction, Corner

of Stanley & Dock Road,

Waterfront, Cape Town,

South Africa

+27(0) 783 092 097

Hong Kong office: Unit 1201-5, 12/F China

Resources Building,

26 Harbour Road, Wanchai,

Hong Kong

+ 852 3507 6191

experienceinvest.com



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