The current situation:
The foundations of the UK property market are strong and market sentiment suggests that this is unlikely to change. The supply and demand gap remains in housing, the stability for long term investment still exists and there is every reason to anticipate a greater degree of inward investment while investors are able to achieve more for their money.
In a statement issued by the Housebuilders Federation on 1 July, house sales and reservations have not been affected by the result of the referendum and the government’s £20bn housing package announced in the Spending Review and initiatives such as Help to Buy and Shared Ownership, remain unchanged.
What might change?
Since very little EU law affects the UK property sector, there is less concern about the legal and regulatory ramifications of Brexit on the property sector than in other industries. Where we will eventually see change will be in environmental and planning regulations which is likely to be primarily around environmental regulations such as Environment Impact Assessments. However, until negotiations are well underway it will not be possible to determine the extent of the changes and there is nothing at this stage to suggest that we will see a relaxing of the current environmental restrictions. Air quality, water quality, habitats and species protection, would still be subject to international environmental treaty obligations and any arrangements that are agreed with the EU as part of new trading agreements.
What impact could this have on business?
In the immediate aftermath, some listed property companies did see their share values dip but at the time of writing, the markets were already bouncing back. Equally, uncertainty has caused a few developers, investors and lenders, to put deals on hold until the markets settle down and we will inevitably see some attempts at price chipping on existing deals. But with volatility comes opportunity and there is recognition that many investors and lenders have a substantial amount of money that needs placing and that the artificial down-grading of both sterling and valuations, generally presents opportunities to secure investments on better terms. Having spoken to a number of clients, most feel this isn’t the same as the jolt felt in 2008 and the common theme is that they intend to continue doing business, no matter what is going on in Westminster or Brussels.
That is not to say that the property sector won’t feel the impact of Brexit – whether we’re in or out of the EU, the industry thrives in stable markets and what is clear is that we are entering into a protracted period of negotiations and uncertainty within our political environment. Inevitably there will be a continued air of caution until a new prime minister is appointed and greater clarity is achieved on what Brexit will really mean for the UK.