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How will 'Brexit' impact London property? The inside track on what happens next.

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Published: 22/05/2016   Last Updated: 29/06/2016  
Author: Sean Purtill    Tags:

 Sean Purtill, Director and Owner of Ellisons, talks ‘Brexit’ and the potential impact on London property after the referendum.

With the June referendum almost upon us, it’s clear that almost every aspect of London life stands to change if the British people choose to leave the EU. For the millions of property owners and renters in the capital, the impact of ‘Brexit’ on their most valuable asset is a hugely important consideration.

As South-West London estate agents for 25 years, Ellisons has its fair share of experience when it comes to a fluctuating property market. We’ve guided our clients through elections, referendums and recessions, so it’s important that we are here to guide them through this most important of events - whether we leave or remain within the EU.

In or out - the property debate.

The National Associated of Estate Agents (NAEA) and the Association of Residential Lettings Agents (ARLA), in conjunction with the Centre for Economic and Business Research (CEBR), have recently produced a report into the potential repercussions of ‘Brexit’ on the UK property market. The report states that London’s average house price would rise from an average of £536,000 in 2016, to £599,200 (by 11.8%) in 2018 if we remain, compared to 591,700 (by 10.4%) if we leave. This is predicated upon falling demand for buy-to-let properties as the demand for private accommodation from non-EU UK residents eases. CEBR’s analysis also shows that 17% of overseas buyers in London’s prime property market are non-UK EU residents, an important point as London has become a choice location for overseas buyers who contribute to the capital’s consistently strong market.

Despite this, the fact that around 1/5 of investors are live within the EU does not mean that the EU has been the primary motivation for investment in the UK market. London has a lot more than EU membership to offer buyers, and property is in demand due to both cultural richness and financial security. The 80% of foreign buyers not privy to EU benefits will continue to buy for the same reasons that we choose to live here; a stable property market, an honest and effective legal system, a multi-faceted and vibrant culture, world leading schools, universities and amenities. We have no reason to believe EU residents will not continue to do so too.

Politics aside, house prices are still set to rise by a minimum of 10% over the next two years (at least according to the research). What is potentially bad news for local and overseas investors is good news for tenants and first-time buyers - who stand to move closer to jumping onto the property ladder.

Pre-referendum slow down, post-referendum rush.

Years of experience have shown us that the London market generally slows prior to big political decisions. Buyers are keen to postpone their property decisions until the political stall has been set out, preferring not to deal with theoretical eventualities. We should not forget that a significant portion of demand was taken out of the market in advance of the stamp duty changes - further slowing London’s pre-referendum property activity.

Claims of interest rate rises and falling prices pushing mortgages into negative equity should also be considered carefully. Economists have already pointed out that the Bank of England will ensure any rate increase will be incremental, and that lenders are required to test applicants ability to deal with a 3% interest rise prior to agreeing to any deal.

Here to guide you, whatever the outcome.

As with the NAEA and Arla, Ellisons is not backing either campaign. The truth is that however much we model, predict and analyse, it is impossible to know exactly what would happen if ‘Brexit’ comes to pass. As an estate and lettings agent it’s vital to remain up to date with the various possibilities, and to give our vendors, buyers, landlords and tenants the best possible advice, before and after the referendum.

We do know, however, that London is and always will be a magnet for property investment and a brilliant city to live in. There are always concerns before big decisions but at Ellisons we have every faith that the capital will continue to flourish, whatever the outcome on June 23rd.