Over the last couple of months I have become increasingly engrossed in the numerous “IN or OUT” debates out there, experiencing my own vote oscillating as I hear the compelling arguments from either side. I suspect I am not alone. Few topics would get the Brits blood pumping more than discussing two things; the impending EU referendum, and a housing market down turn. But in calling for the former, could we be condemning ourselves to the latter? Given the minimal impact the recent additional 3% stamp duty seems to have had on the London property market, personally, I doubt it. In my opinion, the new regulations to preclude money laundering, if properly enforced are a greater threat to the London property market than the EU referendum.
Over the past few months there has been a steady trickle of predictions, with a KPMG survey suggesting two thirds of the property industry feel there would be less inward investment if we were to leave the EU, resulting overall in property prices falling. Not everyone, of course, sees that outcome as bad thing. For every Londoner who has made a killing on the value of his home as London property has become a global commodity, there’s another who resents being priced out of the market. But before the ‘in’ campaign starts to frighten homeowners with prophecies of negative equity, and the ‘out’ campaign tries to lure the priced-out with the prospect of a new era of cheap housing, we should ask whether the fears of estate agents and developers are built on false premises.
It’s true that prime London property has long been held aloft by international investors. According to a Knight Frank study in 2013, 49 per cent of all prime central London buyers were non-British citizens, while 28 per cent did not even live in the UK: their purchases were for occasional use or investment. But it’s unclear what role, if any, the EU has played in attracting this money to London: only 16.5 per cent of these buyers were from other EU countries.
Regarding the UK market as a whole, the consensus amongst 25 global real estate investors with assets under management of over $400bn, was that an initial period of uncertainty could potentially be more immediately damaging to the UK real estate market than the stable post-Brexit world.
“Since the commitment to an EU referendum, the real estate community has been noticeably reticent about investing in the UK,” says Andy Pyle, head of real estate for KPMG.” In times of uncertainty, it’s easier to sit tight.”
Mr Grainger, of JLL, said recently that even if there is a “remain” vote, his company anticipates UK real estate investment volumes “could still fall in 2016 due to uncertainty pre-referendum”. However, some of the pent-up demand could be deferred to the end of 2016, when there could be a surge.
Mark Granger, chief executive of property consultants Carter Jonas, said: “As we saw before the referendum on Scottish independence, many occupiers and investors delayed their decision-making. We expect a similar ‘wait-and-see’ approach as the EU referendum draws near, which could impact on sentiment and activity.”
Finally, could the outcome of both topics simply boil down to how risk adverse we are? If the majority of us are risk adverse, we will likely remain in the EU and find the ever predictable slow down in the property market pre-vote, and a surge in demand afterwards. Whereas if the majority of us are un-afraid of risk, could this result in us choosing to leave EU, and experiencing less of a slow down pre-vote, as well as a reduced surge afterwards?
The bottom line is that it is impossible to say what will happen whether we remain in the EU or leave hence, let the gamble begin!