Jerald Solis, Business Development and Acquisitions Director, Experience Invest
There are less than three months to go until the UK leaves the EU, yet little is actually known as to how Brexit will be managed come 29 March 2019. With Theresa May’s plan having been rejected by MPs, the political deadlock in Westminster continues and the prospect of a no-deal is becoming an increasing probability.
When it comes to the property market, the lack of clarity surrounding Brexit has inevitably made some investors cautious. And fluctuating predictions over how houses prices will rise – or not – over the coming years is at risk of compounding property buyers’ hesitancy.
However, historical data is a valuable resource at times like these. After all, in the past decade or so the UK’s property market has had to withstand a global financial crisis, the fallout from EU referendum and a seemingly never-ending series of political manoeuvrings (including three General Elections). Bricks and mortar has proved its resilience as an asset class in doing so, which is why it remains such a popular area for domestic and foreign investment.
But how may Brexit impact that? And what are the key market trends that are likely to define the real estate market in the coming 12 months?
Steady house price growth
Despite the political and economic uncertainty that has been brought on by Brexit, house prices have been steadily rising since the EU referendum. The most recent demonstration of this came in December 2018, when UK house prices rose by 2.2%, the highest monthly rate of growth in almost two years.
But there is a more interesting trend to note: the impressive performance of regional property markets. While London has suffered from subdued activity as a result of homebuyers adopting a ‘wait and see approach’, other parts of the country have experienced significant growth since June 2016.
The contrasting performance of different regions is due to a number of reasons, ranging from affordability to demand. London’s current stagnation should not, however, detract from the sustained capital growth that the city’s property has experienced in the decade following the financial crisis – since October 2008, the Office for National Statistics noted that house prices in London rose by 80%.
As Brexit fast approaches, analysing historical data in this way can help to allay the concerns that consumers and investors might have when they are making their financial plans.
Regional property hotspots
Returning to the earlier point – looking outside of London, one of the most notable real estate trends in recent years has been the rise of regional property hotspots.
With the private and public sectors directing significant investment into places like Manchester, Leeds, Liverpool, Luton and Cardiff, these cities have become increasingly popular destinations for property investors. Indeed, supported by strong student populations and growing business hubs, mounting demand has seen house and rental prices grow far faster in these areas than the national average.
Liverpool, for instance, is currently benefitting from an influx of government investment as part of the Norther Powerhouse strategy. The results are notable – house prices have grown by nearly 25% over the past five years. And as demand for residential properties and student accommodation continues to swell, Liverpool is expected to experience house price growth of 5% in 2019. This projection comes despite the immediate impact Brexit could have on real estate.
Meanwhile, improved transport links to London has made the capital’s commuter belt towns an attractive and more affordable investment destination for prospective homebuyers. Luton, for example, has been crowned London’s number one commuter location; this is complemented by a rising number of people relocating from the capital.
Given the £1.5 billion regeneration currently taking place in Luton to upgrade the town centre, including the construction of new-builds, this commuter town is likely to remain a popular destination for real estate investors in 2019 and beyond.
Looking to the next twelve months – and beyond
Taking into account the above trends that are likely to shape the real estate market, investors should take doom and gloom Brexit predictions with a hefty pinch of salt. While the challenges are undeniable, and there will inevitably be a period of adjustment after 29 March, current indicators suggest that property’s capital growth is likely to remain positive for the next five years.
Furthermore, when it comes to university cities and commuter towns, where demand for real estate looks likely to remain consistently strong, there remain significant opportunities on offer for those seeking to benefit from property investment in the long-term.
Jerald Solis is the Business Development and Acquisitions Director at Experience Invest, a company that provides property investors in the UK and overseas access to exclusive investments across a variety of asset classes. He is also a Director at Opto Property Group; a construction firm committed to creating developments that have a long-term, positive impact.