Will the EU vote affect UK property prices?By Angelica Malin
The referendum on Britain’s future in the European Union is set to be a defining political moment. The Prime Minister himself said as much when he recently set out, in broad terms, his aims when it comes to renegotiating the country’s relationship with Brussels.
David Cameron told the nation: “You the British people will decide. At that moment you will hold this country’s destiny in your hands. This is a huge decision for our country – perhaps the biggest we will make in our lifetimes.”
A decision of this magnitude is clearly expected to have a wide impact on the nation as a whole. So, what about the prospect for property prices? This is so often held up as a bellwether for the state of the economy as a whole, so how, if at all, will the cost of bricks and mortar be moved by the decision at the ballot box?
The referendum decision is far from certain
The first thing to stress is that it is not yet clear which way the vote will go.
Of 16 polls analysed by the ‘What UK Thinks’ website the average result saw 45% of people saying they will remain in the EU, 39% saying they wish to leave and 16% uncertain or not wishing to vote.
The referendum is due to take place before the end of 2017, meaning there is time for these numbers to change significantly and, of course, persuading even a fraction of those 16% of wavering voters could be decisive.
Economic impact of EU membership is hotly debated
While the result is far from certain, so too are the consequences of staying in or leaving. The trouble is that this has become an intensely debated political topic and it’s tough to cut through the rhetoric to come up with cold hard facts.
The ‘Vote Leave’ campaign, for example, states that the EU is a drain on the UK economy – sucking out £350 million a week – while ‘Stronger In’ calculates that each household is £3,000 a year better off as a result of being in the EU.
The thing to bear in mind is that financial markets are complex and affected by a whole host of factors across the globe. It isn’t a black and white ‘leaving the EU will mean X, staying in will mean Y’ when it comes to the property market but our relationship with the EU does matter and will be a key factor that can influence the whole market.
Uncertainty in the meantime will be significant
One thing that will affect the market right away is uncertainty. As we get nearer to the referendum it’s likely that some overseas investors in particular will keep their powder dry as many did in the lead up to the UK General Election in May. Even those outside the EU are drawn to the UK as a friendly base within which to invest in property and business.
Investors like to be certain about the future so may well wait to buy properties until the outcome has been decided and that may well be significant in London in particular, despite the fact that more than half of people living in the capital think ‘Brexit’ will strengthen the value of their home according to one poll.
Overseas investors are already reliant on the exchange rate when purchasing properties.
If the UK were in the Euro and voting to leave, for example, that would have much more of an impact on prices given the need to establish a new currency in the event of a vote to leave. Whatever happens this will be constant.
In truth the only thing we can be certain about is a period of uncertainty. That will be particularly evident with overseas investors, the sort who gravitate to London and other big cities in the UK. It’s only after the vote, and the subsequent picture becomes clear, will we know what will happen to internal transactions between UK citizens.
The reaction of businesses will trickle through to the economy as a whole and confidence and stability – no matter what the decision – will be crucial factors in determining whether or not property listings show the affect of the EU vote. One thing’s for certain, you’d do well to be sceptical about anyone who reckons they have the definitive answer on the impact of the EU vote. If they think they know it means they’ve probably not considered all of the factors properly.