With the EU referendum only a few weeks away, and polls still showing no clear indication of whether the UK will remain or not – investors across the country are naturally concerned about what the implications will be for property prices.
The Effect of Brexit on the Economy
The Bank of England has already been open in its opinion of Brexit – stating that the referendum itself is causing economic uncertainty in the country. It recently issued a warning, suggesting that leaving the EU would risk a devaluation of the pound, plus reduced economic growth. Mark Carney, the Bank’s governor, also stated that the country would be at risk of higher inflation and increased unemployment if Britain voted to leave.
Reduced Prices – Property Investment Opportunity?
Experts predict that a further effect of Brexit would be reduced property prices. The National Association of Estate Agents (NAEA) and Association of Residential Letting Agents (Arla) stated that leaving the EU would prevent future property price rises – and would leave the average property in the UK worth £2,300 less by 2018. In London, this is predicted to be even more significant – a £7,500 reduction in value.
For landlords with an existing property portfolio, this is unlikely to be welcome news. A reduction in capital growth means that overall ROI is adversely impacted.
In addition to this, experts also predict that rental prices will reduce – again, more unwelcome news for those who generate income from tenants. ‘Leave’ campaigners have suggested that the UK’s population will reduce by as much as one million people by 2026 if the country departs the EU – which means demand for rented accommodation will decrease accordingly.
The NAEA’s report summarises: “Lower immigration would mean less people looking for accommodation…/…(it) would also impact rental prices. UK residents born in other EU countries are far more likely to be private renters. Therefore, if fewer EU nationals move to the UK in the long term, there may be a noticeable impact on demand levels.”
Investing in Property in the UK – Reduced Prices
However, for people seeking buy-to-let property for sale, who have yet to build a property portfolio, the prospect of reduced property prices is likely to be an appealing one. This is particularly the case for people seeking investment properties in London, where prices are often prohibitively high.
Reduced prices enable those investing in property in the UK to get a buy-to-let house at a cheaper rate – with the potential to make greater returns in the future.
The Buy2Let Shop Limited
Ultimately, the future of the housing market is still an unknown – though it seems unlikely that rental demand will drop significantly. In fact, with house prices still proving to be unaffordable for most first-time buyers, demand for rented accommodation has never been so high.
If you want to find out more about the current property market, The Buy2Let Shop regularly host property investment seminars in London, to boost your inside knowledge and inform your purchasing decisions. We also have a range of property investment opportunities, not available on the general market; and offer assistance with buying a house at auction.
To find out more about our services, visit The Buy2Let Shop website today.