As UK parliament struggles through Brexit negotiations it all leaves a bitter taste in the mouth lengthening the concern over the future of our country and it’s economy. How it effects the current property market and how it will effect things moving forward are two things that property investors and home owners are keen to know. Here we ask Jamie Johnson, CEO and Co-founder of FJP Investment for his opinion.
“The original Brexit deadline of 29 March has come and gone, yet the UK government remains stuck in limbo as it attempts to iron out a comprehensive withdrawal deal.
The uncertainty this has caused naturally lends itself to speculation about the future of the country’s economy – and in particular, the fates of prominent industries such as property.
Fortunately, a quick examination of the current state of the UK property market tells us that real estate remains a popular asset, attracting sustained levels of interest from both domestic and international investors. The reasons for this are evident; real estate has historically proven to be resilient in the face of substantial political and economic hurdles, offering long-term capital growth that few other asset classes can match.
In fact, amidst the drawn-out Brexit negotiations over the past few months, house prices in the UK actually increased by 2.8% in the 12 months to February 2019. Meanwhile, month on month prices were up 5.9% according to Halifax, revealing a stronger than expected start to the year even with the Brexit deadline only weeks away. What these two statistics reveal is that Westminster’s disastrous handling of Brexit has done little to dampen market demand for property.
While it remains difficult to predict how the sector will adapt to new market conditions once the UK officially leaves the EU, there are plenty of reasons to be optimistic that real estate will continue to weather the storm.
Sustained house price growth
For one, house prices across the country have continued to climb despite numerous pessimistic forecasts. This is important given we typically use house prices as a measure of both market demand and capital growth.
Although the picture might not be as bright in some areas as in others, the fact remains that the average price of a UK house grew from £214,000 in June 2016 – the month of the EU referendum – to £228,000 in January 2019.
London’s property market has admittedly seen subdued growth since the Brexit vote, but this should not detract from the surging demand for property that is being seen in other regions. The Midlands and north of England, for instance, are spearheading national house price growth; houses in Birmingham are up 16% since the UK voted to leave the EU, while Manchester and Leicester have both seen prices rise by 15%.
Some prospective home buyers have naturally held back from committing to property purchases until the impact of Brexit is fully realised. So as the details of the final deal are unveiled, we are sure to witness some renewed activity in the market.
Property remains attractive
Part of the reason that house prices have continued to climb is that property remains an attractive asset class among investors – one that has proven its ability to withstand difficult times and come out on top.
Let’s just consider the challenges the market has faced over the past decade. Not only did it survive the global economic recession, it has also lived through three general elections and now the momentous Brexit transition.
So unlike other non-tangible assets like stocks and shares, which are subject to volatility, investors have flocked to property as a safe and secure asset that is able to offer both long-term capital growth and short-term yields.
In general, figures suggest that Brexit has done little to tarnish this long-held reputation; in fact, many property investors have invested in more properties since the June 2016 vote.
According to a recent study of more than 500 UK-based property investors, almost half (45%) have bought a new property in the past two-and-a-half years. Meanwhile, 64% said Brexit had not impacted their property decisions at all – reinforced by the fact only 7% had downsized their portfolios.
A renewed focus on construction
While strong demand for housing is naturally conducive to good market conditions for investors, it also brings up concerns about housing supply.
One of the biggest challenges facing the UK property market at the moment is the shortage of affordable housing.
Addressing the housing crisis has long been touted as a government priority, with numerous commitments having been made to boost house building efforts across the country. But while these housing targets are admirable, progress has undoubtedly been slow.
A National Audit Office report recently concluded that half of councils are expected to miss house building targets. Meanwhile, only 44.1% of local authorities had up-to-date plans setting out how they could meet the need for new homes.
As competition grows and the market faces increasing pressure, we must ensure that developers have the support and funding they need to deliver enough housing to effectively meet the needs of the population.
The UK property remains in good shape despite the obstacles it has – and undoubtedly will – face. There are plenty of opportunities for investors that are keen to access the market, and with demand fuelling a rise in house prices, we must also recognise and work to rectify the current imbalance between housing supply and demand.”
Jamie Johnson is the CEO and Co-founder of FJP Investment, an introducer of UK and overseas property-based investments to a global audience of high net-worth and sophisticated investors, institutions as well as family offices. Founded in 2013, the business also partners with developers in order to provide them with a readily accessible source of funding for their development projects.