Brexit

/'brɛksɪt,'brɛgzɪt/

noun

  1. the withdrawal of the United Kingdom from the European Union.
  2. a word that strikes fear into the hearts of property investors everywhere.

With the 31st upon us, no Brexit and an election scheduled for December, Assetz Property is here to give our take on the good, the bad and the ugly of how Brexit could impact the UK property market.

The story so far

It’s very difficult for anyone to predict just how much Brexit will change the UK. While many people would like to know what’s to come, preparing for something so unprecedented is a tough task. However, for the property market, we do have a few loose comparables to look back on.

In 2004, the property market appeared to be in peril. Many had lost faith and expected prices to fall off a cliff and remain low for a long time. However, as pointed out by Assetz Founder & CEO Stuart Law, the market surprised everyone by holding onto its value.

“Why did property not fall in 2004? It’s easy to forget just how negative a lot of the expectations were at the time. Interest rates were high, and we were only just emerging from a sustained downturn,” he says.

“The answer is the same as now: there is an awful lot of money out there looking for a home. People with excess cash are still providing the pure weight of capital. Even on its current figures, property offers a better return than equity and far better than cash when its value is being eroded by 4% plus inflation.’

Again, in 2008, the UK experienced one of the worst financial crises it had ever seen. This time, house prices did fall, dropping a massive 15.9% and reaching an average low of £153,048. Experts foresaw further plummets in the future and to many, the unbeatable asset class finally seemed to be beaten.

But it wasn’t.

Today, HM Land Registry reports that the average house price in the UK has reached £234,853, a rise of 1.3% from the previous year. Despite Brexit turmoil, prices have continued to grow, with some parts of the country achieving higher growth than they ever did pre-2016. The North in particular has seen a recent price boom, with Manchester and Liverpool leading the pack at 4.5% and 4.6%. While these are not the biggest increases they have seen in recent months, they are still positives to focus on. We cannot deny that the property market is slowing down, partly thanks to Brexit, but these numbers show that through it all, growth is still taking place.

So how did we get from then to now? A lot can happen in 15 years, and the ups and downs of the property market are a prime example of that. Just like with any other asset class, growth is never a steady line upwards; it has dips and dives, highs and lows. Brexit will undoubtedly cause house prices to fall, but as we can see from the market’s previous falters, they always bounce back stronger than ever.

As much as we would like property investment to be an easy rise to the top, it isn’t. However, the reason we continue to believe in the market is because we know it will get there eventually and make you, the investor, a significant profit. It may take a few years, or more than a few, but the beauty of buy-to-let is that it offers you two ways to earn: receive a steady monthly income from renters, and once capital growth has reached a point you’re happy with, sell for a profit.

A great time to buy

Brexit has caused a lot of market uncertainty, but it’s exactly because of this that it’s a great time to buy. A lot of people are keen to sell right now, opening up the opportunity for investors to lowball and get exceptional deals on properties that usually wouldn’t be on the market.

As everyone shies away from property due to the risk of falling house prices, falling house prices are exactly why you should buy. Get in low, catch a bargain and receive monthly income while you sit safe in the knowledge that when the market inevitably bounces back, a huge profit awaits you.

An unexpected bonus of Brexit, as well as several new laws introduced by the government, is that rents have begun to increase. HomeLet’s Rental Index found that rent had increased in all 12 of the regions covered in their research. Year-on-year, average rents across the UK rose by 2.5% in September, taking the UK average rent to £967 (£797 excluding London).

We often say this, but with low prices, high rents and the length of tenancies also increasing (up from 29.5 to 33.8 months between August 2018/19), there really has never been a better time to buy.

2.5%

Year-on-year rental growth

33.8

Average tenancy length (months)

What about student property?

As Brexit stops free movement between the EU and the UK, it’s fair to worry about how this might deter international students and affect student property.

Looking at current figures, the number of foreign nationals studying in the UK has steadily increased over the past decade. As of 2017/18, official enrolment statistics reported that 458,520 international students were attending university in the UK, with students from China, India and US making up the biggest portion of this at 38%, and EU students following close behind at 30%. Despite the fears surrounding Brexit, experts have predicted that the number of EU students studying in the UK will remain at a similar amount, while non-EU students are set to rise in contrast.

After Brexit, in line with their goal to increase international student numbers to 600,000 within the next 10 years, the government intends to extend the post-study working visa offered to international students from four months to two years. Launching 2020/21, the visa will be open to nationals of all countries and, according to Alistair Jarvis, Chief Executive of Universities UK, will put the UK “back where we belong as a first-choice study destination.”

This possible influx of international students spells good news for student property, as a survey taken out by UK Education Board UCAS found that 94% of international students are more likely to live in private rented accommodation. With demand for student housing already far exceeding supply (2.9 students to every available bed, Knight Frank), any effect Brexit has on student property will likely be minimal.

We’re here to help

Having been in the buy-to-let property investment market for over 20 years and living through a rollercoaster of changes, we feel confident that our assessment of the impact of Brexit is an accurate one. Things may look worse in the short-term, but there are always silver linings to be found, and the market is sure to enter another period of growth once everything has settled. Property has proven time and time again that no matter what obstacles stand in its way, it will always come out stronger on the other side.

If you have any other worries or wish to find out more, don’t hesitate to get in touch with one of our investment experts today. We’re here to put your mind at ease and make sure any investment you make is as safe, secure and profitable as it can be.

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Risk Warning and Disclaimer:

The price of property can go down as well as up. Historic performance should not be taken as a guarantee of future performance. Geared property investment with mortgages can increase risk of losing money as well as increasing the possible gains. Mortgage products referred to in the website can be withdrawn by the lender or have rates or other terms changed without notice and reference to any products does not imply they are certain to be available in the future. Mortgages referred to may also have certain applicant restrictions and are for indicative purposes only although reasonable endeavours have been used to ensure that they are available at the time of publication and are applicable to a significant number of our purchasers. This site is for information purposes only and nothing on this site should be taken as definitive investment advice for your particular situation without you seeking additional guidance directly from ourselves or from other finance and property professionals. Property particulars on this site do not form part of an offer or contract. The developer and Assetz Property Ltd, whilst endeavouring to ensure complete accuracy in these property particulars, cannot accept liability for any errors. Valuations of property or indicated rents achievable are either estimated or derived from valuations and/or comparables and can change and should not be relied upon without your own additional valuation and research, but we have carried out reasonable endeavours to achieve accurate indications for these figures. All descriptions, dimensions, areas, reference to condition and, if necessary, permissions for use and occupation and their details, are given in good faith as provided by the developer and are believed to be correct. However, these are subject to change, especially, but not wholly, relating to any property that is off-plan or not yet complete. Any intending purchaser should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to their accuracy. The onus is on each individual investor to undertake their own due diligence, enquiries and inspections. Where shown, net yields are calculated as rental income less expected service charges less expected ground rent as a percentage of the property price. No void periods, optional letting agent costs, repairs or other costs are deducted. Our standard Terms and Conditions of Sale will apply. E. & O. E.