How would a “Brexit” from the EU impact the property market?

How would a “Brexit” from the EU impact the property market?
March 9, 2016 Rosie Williams
EU voting

In the run up to the June EU referendum in Britain, we have been considering what impact a decision to leave the EU, otherwise known as a “Brexit“, would have on the UK property market.

A survey conducted by Bishop’s Move showed that 80% of their voters felt a referendum would affect a decision to buy or sell a property, even if that meant simply delaying a transaction until after the vote. A study by KPMG showed that 66% of real-estate experts believed that Britain leaving the EU would have a negative impact on cross-border investment.

Domestic Property Investment

There are two sides to demand in the property market; domestic and overseas. There doesn’t seem to be many predictions that the domestic market would be impacted too much by a decision to leave the EU, other than perhaps a change to interest rates. A change in EU investment doesn’t necessarily make much difference to the first-time buyer.

Overseas Property Investment

Overseas investment may be hit harder in the event of a Brexit. Data from estate agent ‘Knight Frank’ shows that 49% of investors in the central London property market are not from the UK.

A few of the large investment banks already believe that the value of sterling will decrease by up to a fifth in the event of leaving the EU. This would have an impact on the property market as foreign investment falls. For those already invested in the high-value London market, they may choose to sell up and look for safer havens in the EU.

Conversely, even if the London property market falls, many news sources have been reporting an over-inflation in recent years. This may mean that a drop in sterling may not have the same negative impact it might have had 8 years ago.

Additionally, overseas property purchases by Brits in EU countries may be hit harder, as EU legislation makes it more difficult or expensive for the British to invest abroad. It is fairly well understood that overseas buyers are usually welcome so this isn’t expected to become a big problem, but legislative changes could make this possible.

The main opinions seem to be that the London property market would be hit the hardest if at all. However, the opposing belief is that if Britain was suddenly freed from EU regulations then we could attract more inward investment, which the property market would benefit from.

So what will happen if a Brexit happens?

It is clear that there isn’t really much agreement on what would happen to the property market in the event of a Brexit. The upcoming election in June does seem to have put the brakes on the market for the time-being, currently being accelerated by buy-to-let investors cramming in completions before the April deadline.

If a Brexit were to happen, changes to the property market would depend mostly on changes to the economy which only time can tell. If a Brexit does not happen, we can probably expect our property market to take off again after a small lull. Watch this space!