A post-Brexit Recovery for housing? Maybe…

Property News August 9th, 2016
A post-Brexit Recovery for housing? Maybe…

Arthur takes a look at the noticeable effect Brexit has had on the U.K. property market and if there is, in fact, a post-Brexit recovery.

Much was made of the immediate aftermath of the U.K.’s decision to leave the E.U. about the projections for the market. Billions was wiped off both the FTSE 100 and 250. In fact, the crash in value of the pound painted a daunting picture which seemed to support warnings by the Prime Minister and George Osborne about requirements for emergency budgets, cuts to pensions and collapsing house prices. However, there now seems to be some form of life, maybe even a post-Brexit Recovery…

Stimulated by inaccurate projections, the markets initially panicked. However, the markets have shown that while Brexit hit the U.K. economy, in the longer run there should be a post-Brexit recovery. One only has to look as far as the FTSE 100. Since its drop of 8%, the FTSE has shown significant progress in a post-Brexit recovery within the following weeks. This is despite continuing uncertainty over U.K. policy, the deal that must be struck with the E.U. and who will be leading the Labour Party by the end of the year.

There is life outside of London…

The initial projections of a Brexit vote led to a decrease in potential valuation of properties. But, the market is not seen to be shrinking, only ‘cooling off’. This is a concern for some investors, but no reason for wide spread panic, as even this is only a small change in the continued success of house prices. House prices are currently estimated to be around 1 – 2% lower than they would have been with a Remain win.

While Foxtons sparked concerns over the significance of that slowdown, areas in the South-East are unlikely to become a troubled region. Halifax announced an expected a fall of 1% nationwide. But the longer term housing market will continue to see price rises. This will in part be  down to continuing foreign investment as well as continuing demand. Whilst Mayor Khan’s policy towards investors may have some effect once implemented, this is a separate issue to Brexit. However, the damage seems magnified due to news being centred on London. The rest of the country has not seen such negative outlooks. There is life outside of London…

Life After George?Phillip Hammond

Phillip Hammond has made it very clear that Britain is still open for business. His announcement to cease Osborne’s ambition to achieve
a budget surplus by 2020 is a message to the market that the government is making itself flexible for the future. Furthermore, the Bank of England’s setting aside of £250 billion for banks affected has helped to further stabilise the markets. A drop in interest rates to 0.25% is a further indication of them actively addressing the fall in confidence.

The question now turns to the FTSE 250, a more representative group than the FTSE 100. The FTSE 250 has shown some post-Brexit recovery, but has not hit the same levels as pre-Brexit. This is the real story behind whether there will be a post-Brexit recovery across all markets, including the property market. Some of the companies within the FTSE 250 are large contractors. If they continue to struggle, could result in a reduction of completed projects, putting upward pressure on house prices as supply is outstripped even further by demand.

While many express concerns about the possible projections for the property market, it appears to remain a relatively stable and lucrative investment. Furthermore, as confidence begins to return to the markets, this short-term scare will be overcome by newfound confidence and the economy’s return to strength. Hopefully…

 

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