What would a no-deal Brexit mean for the property market?

The current state of political deadlock means that come 29 March 2019, the prospect of a no-deal – a scenario originally touted as a last resort – is a growing possibility.

In light of the political situation, the question of what the future holds for the country’s real estate market is no doubt playing on the minds of homeowners, prospective homebuyers and property investors alike.

For many years, the UK has been considered a safe haven for property investors, with demand from both domestic and international buyers driving prices and rental yields upwards. This, in turn, has fuelled investment into new-build developments and infrastructure improvements both in London and regional hotspots like Liverpool, Cardiff and Luton.

Encouragingly, despite Brexit uncertainty, the long-term outlook for the real estate sector remains positive; according to Savills, house prices in Britain are predicted to rise by nearly 15% from 2019 to 2023, with significant increases expected in the Midlands and the North West.

As we inch closer towards the Brexit deadline, it is important to delve beyond these five-year forecasts and consider just how this political and economic transition will affect the property market, and what investors need to be aware of over the coming 12 months.

Capital growth and real estate

While 2018 proved to be a challenging, and sometimes tumultuous time for the Government, speculation that investors would lose confidence in real estate proved largely unfounded. According to Halifax’s House Price Index, the average price of UK houses increased by 1.3% last year – while the rate of growth is slowing, the market has demonstrated its resilience during a testing period.

Nevertheless, some sections of the market are certainly facing challenges. Parts of London in particular have experienced subdued activity, with the rate of house price growth stagnating as a result of affordability issues and broader investor hesitation concerning Brexit.

However, it is important not to view this trend in isolation. Since October 2008, the Office for National Statistics notes that house prices in London have risen by nearly 80%. As such, a slowdown in price growth shouldn’t come as a complete surprise.

Looking beyond the capital, huge amounts of investment are being directed into the UK’s regional cities. As such, places like Leicester, Liverpool and Cardiff are now regarded as property hotspots for investors seeking to enter the buy-to-let market, particularly when it comes to new-build investment. Indeed, the three cities saw house prices grow by 7.7%, 6.0% and 4.6% respectively in the 12 months to October 2018, according to Hometrack’s UK Cities House Price Index.

Taking advantage of rising regional hotspots

The trend of fast growth within property markets outside of London is one to watch post-Brexit.

The Midlands and North West are just two regions that present exciting opportunities for real estate investors. The influx of investment into places like Liverpool and Birmingham has resulted in significant improvements to the cities’ infrastructure and facilities. Moreover, catering to demand for property, new-build complexes are rapidly rising – offering investors affordable buy-to-let opportunities.

Part of the reason why investors are attracted to these cities is due to their large and established student populations. Indeed, places like Manchester, Leeds and Liverpool are likely to see an ongoing rise in their student numbers, meaning that demand for rental property will remain rife.

Meanwhile, while the London market may have stagnated somewhat, commuter belt towns have also become popular investment destinations. Given their close proximity to London and affordable housing options, places like Luton are experiencing a significant influx of London workers choosing to relocate outside of the city. Luton has taken the lead as London’s top commuter location and is currently benefitting from a £1.5 billion regeneration project to upgrade the town centre.

More new-build properties

With demand outpacing supply, one of the key challenges facing the UK is increasing the number of properties available to rent or buy. Part of the government’s approach to achieving this is encouraging the construction of new-build properties in rapidly rising urban centres; it wants to add 300,000 new homes to the UK market each year by 2022.

This is certainly good news for those looking for buy-to-let investment opportunities in the coming year. And the rise in off-plan investment options as a result of new developments emerging across the country is a trend that property investors ought to watch.

Meanwhile, many off-plan properties are designed to be ‘built-to-rent’, and with this sector having grown five-fold since 2013 according to the British Property Federation and Savills, this presents a clear opportunity for investors.

Given the proven resilience of UK property, Brexit, in whatever form in may take, is unlikely to shake investor appetite for bricks and mortar in the long-term. With house prices set to rise, consistently high demand and the rise of regional property hotspots, the real estate market looks set to overcome the initial challenges that will be posed by Brexit.