Life just doesn’t get any easier for Theresa May. No sooner had her Brexit withdrawal plan been rejected by a record-breaking margin than her government faced a no-confidence vote. The PM survived - albeit by a slim majority.
The one thing almost everyone can agree is that the on-going uncertainty surrounding the UK’s departure from the EU is bad news. And with Westminster seemingly at loggerheads with both itself and Brussels, the prospect of a no-deal – a scenario originally touted as a last resort – is looking increasing likely.
Naturally, this means that landlords and property investors are keeping a watchful eye on political developments; some might be keen to buy more properties, others to sell, but for the time being many are adopting a ‘wait and see’ attitude. But for those not content with waiting for Brexit come and go, we can look to past trends to offer some valuable insight into how we can expect the market to respond to the challenges it will face in the coming 12 months.
So, as the UK heads towards the official Brexit deadline on 29 March 2019, let us review what would a ‘no-deal’ arrangement mean? Moreover, what can we expect from the real estate sector in light on current political and economic events?
A no-deal Brexit
In the simplest terms, a ‘no-deal’ Brexit would see the World Trade Organisation rules on trade replace the current regulations underpinning the relationship between the UK and EU. What concerns many people, however, is the lack of clarity about how this might affect the country’s markets in a practical sense.
Tellingly, the UK property market has withstood a series of major political changes over the past decade – from the financial crisis of 2008 to the more recent 2016 EU referendum. So as we make the final preparations, an analysis of recent trends can provide a useful outlook for those keen to understand how the market is likely to fare over the coming 12 months.
A resilient housing market
Despite gloomy forecasts of a price crash in the immediate aftermath of the EU referendum, the UK property market has proven to be extremely resilient. Granted, while the rate of growth has slowed in some regions – particularly in London – average property prices have continued to rise across the country as a whole.
The most recent indicator of this positive performance came in December of last year; in amidst the height of political turmoil as Brexit plans were put forward, UK house prices rose by 2.2% - the highest monthly rate of growth in almost two years.
Meanwhile, buy-to-let landlords have also recently enjoyed strong rental yields, with the latest data indicating that asking rents in London rose to a record high in December 2018 as market conditions in the capital improved to levels not seen since Q1 2015.
Looking at the bigger picture, the property market has experienced strong growth for a prolonged period of time. Indeed, despite the aforementioned challenges of the past decade, the average price of a house in the UK has risen from £157,000 in 2008 to approximately £220,000 last year, according to the ONS.
It is important to keep these historical trends in mind, particularly as doom and gloom predictions emerge from some quarters as Brexit approaches.
More new builds
One of the main reasons that property prices have risen sharply in the UK over recent decades is the imbalance between supply and demand; there is simply not enough homes to meet demand.
To address this pressing issue, the Government has set a goal to build 300,000 new homes each year by 2022. Whether it will be successful in achieving this ambitious target is somewhat unclear; however, this is certainly a trend to watch for those looking for buy-to-let investment opportunities in the coming year.
Much of the government’s approach rests on encouraging the construction of new-build properties in rapidly rising urban centres – from growing commuter belt towns to thriving student cities like Liverpool and Newcastle. Meanwhile, the rise of off-plan investment options as a results of these new developments means that these areas are steadily becoming popular investment destinations.
Looking beyond London, which is one areas that has suffered as a result of price inflation and Brexit uncertainty, there have been a number of property hotspots around the UK have been enjoying high levels of investment over the past few years; places like Cardiff, Newcastle and Liverpool are but three examples of areas that have benefitted from improvements to their infrastructure and facilities.
Driven largely by year-round demand from students and young professionals, these cities have become popular destinations for property investors. Indeed, growing demand for properties in these areas have driven up prices much faster than the national average.
As a prime example, house prices in Liverpool have risen by nearly 25% over the past five years – and are expected to grow by a further 5% in 2019. The influx of government investment as part of the Northern Powerhouse strategy, coupled with demand for residential properties and student accommodation, has certainly made this a key market to watch.
Looking to 2019
Given the proven resilience of the UK housing market and the promising trends noted above, even a no-deal Brexit is unlikely to shake real estate’s long-term status as a popular asset class.
Moreover, given the continued appetite for UK property among domestic and foreign buyers, as well as the steady rise of new-build properties, there are plenty opportunities on offer for property investors in the coming 12 months.
Jerald Solis is the business development and acquisitions director at Experience Invest, as well as a director at Opto Property Group.