The date has been set and the die has been cast – after 40 years this June voters will have a chance to decide if Britain should stay in the EU and speculation on the possible impact of a Brexit has reached fever pitch.
While politicians, businesses and industry experts are willing to throw their hat in the ring, at the moment their opinions are largely hypothetical. No one knows for sure how a Brexit would affect the UK economy, especially as so much depends on the terms and nature of the departure.
In the shorter term, it’s this uncertainty around which way the UK will vote which is the biggest cause for concern, and from a real estate perspective it most likely to cause investment levels to come off the boil.
This bump in the road could soon be forgotten if the UK votes for the status quo however as seen following the Scottish referendum – but what would happen if we decide to exit on 23 June?
Should the UK leave the EU, many are concerned that a sudden dip in capital from overseas could see the pound suffer a sharp but short term decline, which may decrease the attractiveness of the market – something we’re already witnessing with the pound currently at its lowest point against the USD since 2008.
Given the international presence in the UK, if this continues, house prices could certainly be affected, and it’s likely central, prime London would be hit the hardest in the short term – however in time the rest of the UK would feel the pain too. HSBC has also forecast that that a Brexit would have an “adverse effect” on London office values.
However, in the longer term it’s also possible that a fall in sterling could actually entice overseas investors, as they take advantage of lower prices and short term market instability.
London’s strength in financial services, technology and insurance among other industries, together with its reputation as a global financial hub could well be enough to prop up commercial property interest in the longer term.
For investors, the Chinese slowdown and a potential interest rate rise are greater causes for concern.
Another potential impact of Brexit that cannot be ignored is the cap to migration.
The ability to control our borders and create a fairer policy on immigration which doesn’t favour EU citizens is seen by many as a potentially positive result of Brexit. But this view is not likely to be shared by the construction industry, which is still suffering from a skills shortage as a consequence of the recession: a gap that European workers have often been filling.
Reducing migration levels could limit this talent, as well as affecting the international culture that London and other major cities have become accustomed to – potentially causing further negative impacts on the economy and the property industry.
Either way, we’ll certainly be in for a bumpy ride over the next few months, but it’s important to remember the property market will still be there.
The demand for UK homes, offices and other forms of property will still exist from businesses and consumers, and while it’s understandable that such a potential and momentous change has caused uncertainty around its future, history tells us that the UK has the strength to bounce back.
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