One of the big issues currently being debated throughout the UK is whether we should leave the European Union. Talks of a ‘Brexit’ have been happening since the beginning of 2013, when David Cameron promised an in/out referendum if the Conservative Party were elected in 2015.
The referendum date is currently set for 23rd June, but what will the result mean for London’s property market?
KPMG hosted a survey which found that 66% of property experts believed that leaving the EU would have a negative impact on London’s property market. The worry for the capital is that it would see a decrease of the inward foreign investment, which has led to the rapid increase in housing prices. A decrease in foreign support would harm the top end of the property market which relies on the wealthy to meet the multi-million price tags.
While Eurosceptic and Europhile campaigners have argued the benefits of either result, it’s still a close contest. Current YouGov polls show that 40% of respondents would vote to stay within the EU while 37% want to leave, the remaining 23% either weren’t sure or wouldn’t vote.
Lisa Hollands, Residential Executive Director of CBRE shared her views on the referendum:
“I don’t think the UK will leave the EU. And if we do? This is the 1 million dollar question, surrounded by so many unknown factors. What we do know is that a two year negotiation would follow a ‘leave’ vote, thus dragging out the current uncertainty. This potentially could disrupt the investment and development market.”
It appears that the market has already been affected by the looming referendum. Estate agents Bishop’s Move surveyed 1,000 home owners and found that 47% were delaying any property transactions until after the referendum and only 20% of respondents said it wouldn’t affect them buying or selling.
This uncertainty could potentially have a knock on effect in Britain. A report created by Berenberg suggests that a yes vote may see investment and spending decline, cause a drop in overall growth and potentially lead to another recession.
The capital is facing a lot of property problems at the moment, including a shortage of affordable housing. However, if the UK decides to leave the EU this demand for housing, especially in the capital, could help save London’s residential property market.
Berenburg suggests that the housing shortage and demand based schemes such as Help to Buy alongside low interest rates would prevent a sharp drop in house prices.
Lisa also spoke about how the need for more homes throughout the capital should keep the residential market strong:
“52,000 new homes need to be built in London every year, and we are currently building around half this level. It is this fundamental undersupply of homes which helps to support the market.
At CBRE Residential we are forecasting a 5% rise in London house prices in 2016, and a 28% rise between 2016 and 2020 largely because of the strong imbalance between supply and demand in our capital.”
The potential exit from the EU will have a massive effect on the United Kingdom and while there are no certainties on the impact on London’s property market, it’s still an important factor to consider when it comes to the referendum in June.