What a momentous month, with an earthquake erupting in the financial markets. The epicenter for the chaos was London, but the aftershocks will undoubtedly reverberate around the world for months and years to come. Unless you’ve been living in a rabbit hole for the past few weeks, you’ll know that the UK electorate voted in the referendum for the UK to leave the EU, David Cameron has resigned as a result and the Conservative Party is now deeply divided and rudderless at the time when the country really needs someone to show strong leadership and set out a vision for the future.
Hopefully over the next few weeks a leader will emerge from the pack of Gove, May, Leadsom and any others who put their head above the parapet and are prepared to take the UK into a testing, uncertain and shaky few years.
What does Brexit mean for the UK property investor?
Market uncertainty allowed Sterling to fall by around 10% over the few days following the referendum results, meaning that for non-UK investors, the ability to pick a British bargain significantly increased. This is dependent on being able to get a mortgage, with UOB in Singapore grabbing headlines recently by being one of the first banks to no longer offer lending on property in London.
Pre-referendum predictions by George Osborne that should Leave win, property prices could fall by up to 18%. Whilst it is too soon to tell how true this prediction will be, a recent article indicated that prime London property is suffering.
If property prices were to fall, paradoxically this would not be bad for landlords as yields would increase and the ever-tightening mortgage criteria ratios recently introduced will be easier to adhere to. Mark Carney, the Governor of the Bank of England has also indicated that interest rates may have to fall further from the current historical low of 0.5% in order to assist the UK Economy.
Whilst we await the outcome of the talks that will happen between the EU and the UK with regard to what the relationship between the two parties will look like in the future, we believe that ultimately the UK will have to accept the free movement of goods, capital, services and more importantly people in order to negotiate any kind of decent deal upon exit. With this in mind, we do not believe that tenants from inside the EU will significantly be affected by Brexit and thus demand will remain constant from this market segment.
What impact will Brexit have outside the EU?
Whilst the UK may suffer, other countries are in line to benefit from Brexit. In the lead up to the Referendum, many banks declared that they would look to shift operations away from the London and the UK, with Dublin, Frankfurt or Paris benefitting and certainly would be worth keeping a close eye on. PWC have estimated that London could lose up to 100,000 jobs by 2020
Bargain hunters may be looking to capitalise on the 10% drop in price due to the FX fluctuations, but those looking for a safe haven for their investments may well start to shy away from the traditional choice of UK Property and look further afield, with Japan, Hong Kong, Singapore and Australia now becoming increasingly attractive options for the risk-averse investor.
Australia
As investment from overseas pours into the booming Sydney market, Sydneysiders have been looking elsewhere, with nearly 25% of New South Wales investors (and 13% of Victorians) looking North to Brisbane to invest, leading to some new developments being 90% sold to investors.
This comes as both NSW and Victoria look to slap additional stamp duty charges on foreigners buying property; the former introducing a 4% stamp duty for foreign buyers as of June 21st and in the latter state, overseas investors will pay 7% Stamp Duty from July 1st (up from 3%).
Focus on buying abroad?
With the above in mind, have you considered or brought property abroad? Let MyPropp.com know in their latest survey.
