Earlier this week, David Cameron confirmed that a referendum will be held on 23rd June to decide Britain’s membership of the EU. The prime minister’s announcement followed a round of talks with fellow EU nations to secure a deal with Brussels that would allow an “emergency brake” on EU migrants claiming in-work benefits for seven years, restrictions on child benefit for EU migrants and an opt-out from the EU’s commitment to forge an “ever closer union among the peoples of Europe”.
“I do not love Brussels. I love Britain. I am the first to say there are many ways the EU needs to improve,” Cameron said in a statement. “The task of reforming Europe does not end with yesterday’s agreement. I will never say our country could not survive outside Europe … That is not the question. The question is will we be safer, stronger and better off working together in a reformed Europe or out on our own.”
While the political campaigns will begin in earnest over the coming weeks and months, what would a Brexit mean for the property industry?
We break down some of the predicted impact the historic move could have upon both British real estate and property markets overseas.
“While both sides of the Brexit debate have legitimate concerns, it’s difficult to ignore the backlash of a Leave vote,” argues Nikolas Xenofontos, Head of Risk at easyMarkets, a global financial trading company based in Limassol, Cyprus.
“We’ve seen what uncertainty can do to investor morale. Be prepared to multiply that tenfold in the case of Brexit.”
Indeed, the latest figures from HMRC show that the the provisional seasonally adjusted UK property transaction count for January 2016 was 105,940, down 2.8 per cent from the previous month, which some estate agents have interpreted as a sign of the Brexit uncertainty already deterring deals.
“How will Britain disengage from the EU? Which model will it adopt? How will Brexit impact business and how would foreign direct investment be affected? These important questions will be top of mind for investors leading up to the Brexit vote,” adds Xenofontos.
UK House Prices
Online estate agent eMoov.co.uk, has predicted an EU exit could see UK house prices drop by 5 per cent. eMoov recently surveyed over 1,000 UK homeowners and found 55 per cent of those asked believed leaving the EU would impact the value of their property.
It won’t necessarily be leaving the EU itself that could see house prices drop, though, notes eMoov, but the uncertainty among homeowners and buyers as to what will happen next.
“Should the UK public vote to leave the EU, we believe it could have a detrimental knock on effect to the UK property market. We’ve been part of the EU for over 40 years now, so it’s understandable that such a momentous change will lead to uncertainty amongst the UK public, as to the resulting implications an exit will have on them,” comments Founder and CEO of eMoov.co.uk, Russell Quirk.
While the residential market could suffer a slowdown, HSBC has also forecast consequences for the country’s commercial property sector. The lender says that a Brexit would have an “adverse impact on the London office market”, with a wider GDP slowdown potentially affecting rental growth.
One often overlooked aspect of the property market, both in and out of the UK, is air travel – low-budget flights have become a crucial resource for people travelling to their overseas homes.
Without the influence that comes with being part of the EU’s Open Skies Agreement, though, Brits could see a rise in the cost of flights to Europe, according to leading voices in the travel sector, including the CEO of budget airline EasyJet.
“If these areas are no longer cheap to get to, the attraction of owning a home there will dwindle,” says Elaine Ferguson, Head of OverseasGuidesCompany.com’s Resource Centre.
The negative impact on the disappearance of low-cost air travel would not only make affected areas less attractive to new buyers, affecting the value of property there, but it would also cause the local rental market to suffer.
“In recent years, cheap air travel has encouraged more people to rent a privately owned property for their holidays,” adds Ferguson. “So buyers have been able to purchase, quietly confident they could achieve a certain level of holiday lets each year, the proceeds of which would contribute to the running costs of the property. A hike in the cost of flights could destroy this, forcing many homeowners to find extra resources to help cover their property’s ownership costs.”Google+