Brexit is not nec­es­sar­ily bad news for the UK

Financial Mirror (Cyprus) - - FRONT PAGE -

And so it has come to pass, the UK is one step closer to leav­ing the Euro­pean Union, which means un­cer­tainty will creep into prop­erty mar­kets in the com­ing months, but it is not all bad news.

So many of the head­lines have con­cen­trated on how prices could fall, how there won’t be enough work­ers in the con­struc­tion in­dus­try un­less steps are taken to ad­dress the skills cri­sis, and how in­ter­est rates will rise.

But there are pos­i­tives as well. Builders will, by all ac­counts, be glad to see the end of EU red tape, fall­ing prices will help first-time buy­ers and, in re­al­ity, in­ter­est rates are un­likely to rise any­time soon and could even fall.

It must be re­mem­bered that the UK hous­ing mar­ket is very much tied to the econ­omy and wages, so it is these two ar­eas that will give us clues as to how the prop­erty mar­kets will play out. Yes there is likely to be less in­vest­ment from over­seas buy­ers in the prime prop­erty mar­ket in Lon­don, but this will be very short term as cur­rency ex­change will soon en­tice buy­ers adopt­ing a wait-and-see at­ti­tude.

The Chan­cel­lor Ge­orge Os­borne made a state­ment on Mon­day, but there is un­likely to be any­thing con­crete re­gard­ing the hous­ing mar­ket for now. He is much more likely to wait and see if any­thing needs to be done, but prob­a­bly takes the view that if the econ­omy is shored up then so will the prop­erty sec­tor.

Yes, bor­row­ers who are look­ing to make the big­gest fi­nan­cial de­ci­sion of their lives want to see and feel that noth­ing is likely to risk their jobs or in­crease their mort­gage pay­ments, but if in­ter­est rates come down and they can se­cure a five-year deal on a very low rate then they should have some se­cu­rity. In­deed, econ­o­mists at JP Mor­gan have pre­dicted that bor­row­ing costs could fall to zero by Au­gust.

There could be a re­duc­tion in hous­ing trans­ac­tion num­bers un­til bor­row­ers are more cer­tain of what the po­si­tion is, but this is un­likely to be long term. Those who have to move house for a job, for fam­ily rea­sons, etc., will still do so and the lack of sup­ply is not sud­denly go­ing to change overnight.

Once ev­ery­thing has set­tled over the sum­mer months, the mar­ket is likely to pick up again later in the year. So, the in­her­ent un­der-sup­ply of hous­ing should con­tinue to un­der­pin the mar­ket as the de­mand will al­ways be there.

It should also be re­mem­bered that within the UK there are very dif­fer­ent prop­erty mar­kets. Growth in Lon­don has been slowly for some time, es­pe­cially in the prime sec­tor, so that may con­tinue dip­ping, but mar­kets in the north of England, for ex­am­ple, are un­likely to be af­fected to the same ex­tent.

The gen­eral opin­ion seems to be that the re­sult of the ref­er­en­dum is a shock, even among those in the Leave cam­paign, but the Bank of England, the Trea­sury and large com­pa­nies will have made con­tin­gency plans. The UK hous­ing mar­ket is too re­silient and comes from a base of be­ing a good long term in­vest­ment whether for home own­ers or com­mer­cial in­vestors.

That will not change.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.