UK hous­ing mar­ket won’t be saved by the EU ref­er­en­dum, says NAEA and ARLA

The Oban Times - - Property -

A Bri­tish with­drawal from the EU risks dras­ti­cally re­duc­ing the con­struc­tion work­force, com­pro­mis­ing cur­rent plans to build hun­dreds of thou­sands of new homes needed to ease the short­age in sup­ply, ac­cord­ing to the Brexit re­port from Na­tional As­so­ci­a­tion of Es­tate Agents (NAEA) and As­so­ci­a­tion of Res­i­den­tial Let­ting Agents (ARLA). Com­piled with the Cen­tre for Eco­nomics and Busi­ness Re­search (Cebr), the re­port looks at the ef­fect a ‘Brexit’ or a ‘Bre­main’ re­sult would have on the UK prop­erty mar­ket, fol­low­ing the ref­er­en­dum on June 23. The re­port highlights a num­ber of short and long-term im­pli­ca­tions po­ten­tially aris­ing from the up­com­ing vote.

Com­pro­mis­ing stock: Skills short­age

While the im­pact Brexit will have on mi­gra­tion poli­cies is un­con­firmed, im­pos­ing greater re­stric­tions on for­eign work­ers com­ing into the UK may com­pro­mise the UK’s abil­ity to build homes – and the Gov­ern­ment has pledged to build one mil­lion new homes by 2020. Con­struc­tion-based jobs are de­creas­ing in pop­u­lar­ity among UK na­tion­als, and as one in 20 (five per cent) cur­rent con­struc­tion work­ers were born in non-UK EU coun­tries1, work­ers from non-UK EU coun­tries are be­com­ing more im­por­tant than ever in fill­ing the skills gap to boost hous­ing stock.

Mark Hay­ward, man­ag­ing di­rec­tor of the Na­tional As­so­ci­a­tion of Es­tate

Agents said: ‘ An “out” vote could mean that in 10 years’ time we’d find ourselves with a se­vere skills short­age of con­struc­tion work­ers. So even if we then had plan­ning per­mis­sion, in­vest­ment and ma­te­ri­als to build more hous­ing, we sim­ply wouldn’t have the re­source to put the bricks and mor­tar to­gether. It has the po­ten­tial to have a very dam­ag­ing ef­fect on the fu­ture hous­ing mar­ket.’

For­eign in­vest­ment in the UK

How­ever, an ‘out’ vote could pro­vide first-time-buy­ers (FTB) with breath­ing space as de­mand for hous­ing eases off. Non-EU busi­nesses are cur­rently at­tracted to the UK’s sta­tus as a gate­way to the sin­gle mar­ket as it al­lows them to es­tab­lish and grow their pres­ence across Europe. In 2014, a fifth (19 per cent, £5.3bn) of to­tal FDI in­flow into the UK came from EU sources2, and in 2013, 17 per cent of sales in Lon­don’s prime prop­erty mar­ket made to non-UK re­cip­i­ents were to Euro­pean na­tion­als3. In the event of Brexit, a por­tion of FDI would be redi­rected to EU coun­tries, ‘free­ing up’ hous­ing units, par­tic­u­larly in Lon­don, pre­vi­ously pur­chased through FDI for Bri­tish buy­ers.

Re­duced mi­gra­tion flow

There are cur­rently 3.03 mil­lion4 UK res­i­dents who were born in other EU coun­tries. If, fol­low­ing a Brexit vote, the UK does not main­tain free move­ment of labour, the to­tal pop­u­la­tion of the UK could de­crease by 1.06 mil­lion peo­ple. With fewer peo­ple, de­mand will ease, mak­ing the mar­ket more ac­ces­si­ble for FTBs, as well as sec­ond step­pers and last-time-buy­ers, and this is will be es­pe­cially ap­par­ent in the cap­i­tal. Re­duced mi­gra­tion would also af­fect the pri­vate rental sec­tor (PRS). Cur­rently, pri­vate rent­ing is a more pop­u­lar choice among UK res­i­dents born in non-UK EU coun­tries than for UK born in­di­vid­u­als; if mi­gra­tion re­duces the flow of ren­ters from Europe, de­mand will weaken, which would put down­ward pres­sure on rent costs. David Cox, man­ag­ing di­rec­tor of the As­so­ci­a­tion of Res­i­den­tial Let­ting Agents said: ‘ The fact that rent costs would face down­ward pres­sure is both a bless­ing and a curse. While ren­ters should face fair and rea­son­able prices, land­lords need to be able to at least break even on any out- go­ings they have, such as a mort­gage. If de­mand eases to such an ex­tent that land­lords can­not re­cu­per­ate costs, we’ll likely see a mass exit from the mar­ket, which would then have the op­po­site ef­fect on de­mand as sup­ply falls – and we’d be back to square one.’ 1 2011 Census, Eng­land and Wales 2ONS, De­cem­ber 2015 3 Knight Frank Res­i­den­tial Re­search, 2013 4 ONS, mid-2014

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