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