As the UK moves to leave the European Union, the effects this will have on the UK property market is still unclear. It’s no secret Brexit will have some effect on the market, however this might not be that bad for those looking to invest in property.
With Brexit uncertainties on the horizon and lots of questions to be answered, we take a look at three possible outcomes and how they’ll affect the UK property market.
Buying property can be more affordable
Over the past year, property prices and sales have remained healthy despite the uncertainties of the Brexit deal. In a year-on-year comparison, January 2019 saw 1,340 more properties sold than the same time last year, despite concerns over falling values.
Over the period of time since the Brexit vote, areas of the UK have seen drops in their initial value however this shouldn’t be a cause for concern. Property is a cyclical investment that is usually retained for a medium to long term. Investors and homeowners recognise the natural cycle the market has. They are unlikely to be deterred by this as they know the market will recover over the period of their investment.
In 2018, the average property price in the UK increased by just 1.02%. Despite the impacts Brexit may have, the high-street bank Halifax are still predicting a 2 to 4% average property value rise across the UK
This presents a great opportunity for investors wanting to capitalise on an investment hotspot, existing homeowners looking to secure a better deal on a new home, or first-time buyers hoping to make their move on the property ladder. Cheaper initial purchase price on a property will make for easier mortgage repayments, while the increase in property values after the initial slump would provide steady capital appreciation over the next 5 to 10 years. Whilst exact figures differ from source to source, predictions of a 15% property market growth between now and 2023 are not uncommon for many UK postcodes. The trick for buyers here is picking the right one.
Whether you’re an existing homeowner, first-time buyer, or investor in a buy-to-let property, now could be the time you get a great deal on the property of your dreams.
Fear not landlords, Generation Rent is here to stay
Investors buying properties to rent out are still in a very good position despite Brexit concerns. With property ownership still unachievable to many and a generation not as concerned with property ownership, it’s clear that Generation Rent isn’t going anywhere.
With higher costs of owning a property, compared to the convenience and flexibility of renting a property, it’s no surprise rental properties are still in high demand. City centre properties still present an attractive opportunity for professionals looking for easy and convenient living arrangements in close proximity to city centre opportunities. Our AXIS and Oxygen developments are in great locations for Generation Rent, both occupying central Manchester locations that are only a short walk from plenty of great bars and restaurants in the city centre. With rental yields of up to 6%, investors can make some very healthy returns despite the uncertainties of the UK’s exit plans.
As mentioned above, property prices are likely to take a bit of a bump. At the height of Brexit uncertainty towards the end of last year, 19% of house prices fell nationwide during December 2018.
Whilst this is a problem in the short term, the long-term outlook paints a more positive picture. In the five-year period following Brexit, property prices are expected to rise across the UK. Manchester is set to see a 21.6% increase in property value over this period, with areas of the Midlands like Birmingham following suit. Despite the initial hit the “Brexit Factor” may have, this is something the market will easily be able to recover from and has done previously.
One of the easiest comparisons to draw here is between predicted Brexit outcomes and the outcomes of the 2008 global financial downturn. In June 2009, house prices had fallen by 20% since the crash. Despite this, in the following six years property prices had returned to pre-crash levels and have been growing steadily ever since. Introduction of government support schemes such as Help to Buy also supported the growth and regeneration of the market.
While Brexit uncertainties are there, history shows that the market can and does recover easily. While an initial slump may be a bump in the road, this is a great time for investors and buyers to make their move.
Out of all Brexit uncertainty, London looks set to be hit the worst. Since the Brexit vote, house prices in London have already begun to fall, with a no-deal scenario potentially triggering property value drops of up to 40%. With economic uncertainty in the capital, overseas investors are turning their attention elsewhere to cities with a more promising outlook and better rental yields. In the aftermath of Brexit and the following 5 years, property prices look set to rise by just 4.5% in London.
Whilst Brexit does present a lot of questions, there are ways for investors to minimise risk and get the most from their investment.
Location, Location, Location
The area you choose to invest in will make a huge difference in the following years after Brexit. Areas such as Manchester show projected property value rises of 21.6% over the next 4 years. Investors are in a great position to make great returns regardless of the outcome due to this continued capital growth. Our Oxygen development offers investors in Manchester a projected 15% capital appreciation on its completion with rental yields of up to 6%.
Buying off-plan has always been a cheaper option for investors, with Brexit making little difference to this. Our off-plan developments such as Park Gate at Lyndon Place give investors a great chance to invest with very little initial capital input, but with the potential for strong returns both in capital growth and rental yields.
Student accommodation looks set to weather the storm despite the uncertainties. A proven track record and high rental yields will always be appealing to investors, especially with guaranteed rental terms and constant student demand.
Want to find out more about how to make the most of your investments? Get in touch with one of our team today.
*All facts and stats correct at the time of writing and upload.