The United Kingdom came under intense scrutiny when its people voted to split from the European Union via a close referendum held last June 2016,– 52% – 48% in favour of the “leave” vote. This event has been labelled as “Brexit”, and from the views of most experts in economics and politics, it seemed to be risky move that could put the economy of the United Kingdom in a record-breaking low.
However, months after Brexit, it seems like the biggest worries of both the political and economic sectors have been unfounded. Although there were considerable downturns brought about by the surprise of the vote, in a few short months, the economy and the UK property market have slowly risen up and have gotten stronger due to UK’s decision to leave.
Effects of Brexit on the UK Property Market
Every economy works under the influence of incentives, and in the case of Brexit, the uncertainty brought about by the United Kingdom’s possible decision to leave have left people cautious, triggering a certain pause in economic activity. After the UK’s decision has been solidified by a referendum, the uncertainly felt by both the foreign and local markets have enforced changes in the way the market behaves, — cautious prospective property buyers have halted their enquiries, and there was an increase to reports of deals falling through.
Business has since picked up however, after the predicted dramatic fallout in the housing market failed to materialise. In fact, according to the Nationwide’s house price index published months after Brexit, there was a 5.3% growth in the UK property market. Although that growth rate is lower than the previous 5.6% growth rate, it seems to be quite a feat considering the immediate and significant economic downturns predicted by various people before Brexit actually happened.
Robert Gardner, the Chief Economist of Nationwide, even said that the 5.3% growth rate remained within the narrow range of 3% to 6% that has prevailed since early 2015. This means that with or without Brexit, this percentage growth could have happened at any point during the year. This growth rate suggest two things: Firstly, it says that the predicted severe negative impacts of Brexit on the field of property market is not true. Second, it also means that amidst all fears, the property market in UK is safe and stable. Britain remains to be at the top of the most popular destinations for investors internationally, as it solidified its transparency and ability to grow even with much uncertainty.
As mentioned earlier, UK’s decision to leave the European Union has caused a certain amount of hesitation in the world market. This did not just temporarily set back the growth of the property market by 0.3%; this also caused the Sterling Pound to drop its value.
Although it may seem like a bad thing, it actually isn’t. The sharp decrease of the pound, its lowest in 31 years, has catapulted UK’s property market into the world centre stage, making the assets in UK more affordable by 12%. More and more property enquiries and transactions are being done by international investors from Asian countries like China, as well as the Middle East, particularly in areas within and around the capital. This does not just mean that there will be a rise in property dealings and sales in UK. This means an infusion of economic growth due to increase on foreign investments.
Essentially, the reason why there were initial setbacks in the UK property market post-Brexit isn’t because there was room to fear for the worst, but because fear and uncertainty have ruled and influenced the behaviours of individuals dealing in the market. People were much more cautious because they do not know what to expect, but now that they see that the economy and the property market appears to be stable and in fact, growing, more and more businesses and individuals can become interested in dealing with the UK property market again. The fact that the property market has withstood the suggested after-effects of Brexit only increases the level of trust that people hold over the stability and safety in UK property dealings.
Brexit: A Cause for Optimism
Months after Brexit, it seems like it is business as usual again for the sector of the UK property market. The projected severe downturns caused by Brexit remained to be unfounded, and in fact, it seemed to have triggered a massive foreign property and estate enquiry in UK, which is not just a good thing for the property market, but is also a great thing for UK in the investment front.
Locally, the property market continues to be ruled by the laws of supply and demand. Since the UK have missed housing construction targets for years, the increase in population will not just mean that property enquiries will be stable—it also means that enquiries and transactions could possibly increase in the coming years.
Overall, it would appear that Brexit has actually had a positive effect in the property market in the UK. It has not drastically affected the property dealings locally; in fact, the local property market seems to be as stable and transparent as before. In addition to that however, it attracted and brought foreign investors to the UK. The United Kingdom has utilised its short term uncertainty and transformed it into a long term business and investment opportunity.
At the moment, the future of the economy of UK after Brexit still remains to be determined. After all, it hasn’t been long since the referendum occurred. However, the increasing amount of investments and property dealings in the UK after Brexit shows that UK is treading the right path. Amidst fears of severe economic backlash, UK has remained as strong, as stable, and as transparent as ever. This signals a new era in the UK property market—one that people would not forget for years to come.