How would an exit from the European Union affect the UK property market?
I don’t like to get involved in major political debates. I very much see my job as trying to ensure any policies which are introduced help to solve or enhance housing delivery in the UK. If policies have a negative effect, I try to say so; if they are positive, I am supportive, whatever the colour of the government.
However, as I have been invited onto Victoria Derbyshire’s new BBC2 show on Monday morning to chat about the UK and the EU, I thought I’d better think through the potential impact on the property market, from my perspective.
I am just as keen to know what you think, so do contact me and let me know your thoughts!
Why people want to leave the European Union
From what I can gather, those who don’t want to be in the EU argue that there are huge costs which support a pretty inefficient ‘bureaucracy’. They point to the loss of our border controls and the many legal changes imposed on us which, if we became independent, we may not choose to abide by.
Those in favour of a Brexit are keen to point out that Switzerland, Norway and economies like Japan survive perfectly well without being members of the EU.
Why people want to stay in the European Union
Those who want to stay in the EU argue that the freedom of movement benefits UK people working or living abroad as much as it does people working here. They point out that we secure investment which might otherwise not come our way and that we have good trading relationships with the EU which would otherwise be pretty complex.
Their thoughts are if we come out, we’d be strapped to many of the same issues we are now, we would just be unable to influence the way Europe worked ‘from the inside’.
Do the Prime Minister’s recent negotiations help us to stay in?
David Cameron seems to have won some good changes. He has secured permanent protection for the pound and we will not have to fund eurozone bailouts necessitated by economic problems relating to the Euro.
Nor do we have to take part in moving towards an ‘ever closer’ union as some in the EU appear to wish to do so – in other words our ‘status quo’ with Europe can be maintained as it is now.
Finally, the deal agreed says we don’t have to take on all the regulations implemented by the EU and, when it comes to immigration, in future we will have the ability to restrict EU migrants’ access to in-work and out-of-work benefits.
So what would happen to the property market if we stay in?
I believe the current state of affairs would pretty much remain. Our economy would continue to grow and recover from the recent recession and, as long as incomes rise, so will property prices and rents – and at reasonable rates, not the huge increases we have seen in the past.
What would happen to the property market if we pulled out?
My view is that, over time, we would be OK coming out of the EU. We have a pretty big and successful economy globally – for now. However, what economies and property markets don’t like is uncertainty.
Coming out of the EU, whether you agree with it or not, will bring uncertainty. Some companies may hold off investing commercially, other people may postpone buying property or coming here to live and work until the dust has settled.
Looking back at the recovery from the last recession we need another three or four years to get or economy back on track. Anything which would take company, investor and government focus away from a recovery could well hamper an economic upturn in the near future.
This could certainly hold back property prices, but it could also hold back investment in building more homes; for example large landlords from Europe currently investing in big rental property projects. So the rental market supply could be hit, too.
This level of uncertainty could lead to lower price growth (as opposed to falls) and higher rental growth, which isn’t a great combination for anyone involved in the property market. People who are planning to come here from Europe may change their minds, and those who are already here may decide to leave. So those renting out Houses in Multiple Occupation to lots of eastern Europeans may well be hit with a demand problem, too, lowering rents for this particular sector.
Also, anyone thinking that leaving the EU will lead to less legislation in either building or letting homes will be disappointed! This government is keen to regulate the market in England with individual rules and regulations such as requiring smoke alarms and, in some cases, carbon monoxide alarms. However, they don’t want overriding regulation of letting agents or the ‘good landlords’ in England at all, so much of the letting legislation which is being introduced remains completely unenforced.
Finally, for those in Wales, Scotland and Northern Ireland, lettings rules and regulations are likely to continue to be strengthened so, whether in or out of the EU, increased costs and less control over letting to tenants are inevitable.
One piece of research which has wound me up though is the latest from eMoov which says ‘property prices will fall by 5% with a Brexit’. This ‘statement of fact’ actually stems from a mini survey which asks homeowners what they think will happen.
So my recommendation is to ignore this kind of hyperbole – it has no statistical relevance and to me is just for PR purposes. Unfortunately it appears the media aren’t so worried about that and prefer to promote it through ‘churnalism’ – in other words, it’s just page-filling and clickbait.