Analysts see foreign investment into UK property market spiking as Brexit concerns dim

Foreign investment into United Kingdom property market will potentially spike as those that went for ‘Leave Vote’ won Thursday’s referendum to decide whether Britain should leave the European Union or not, ending the Brexit concerns that significantly affected the market, analysts have said.

Brexit concerns had been a major issue in the UK property market, leading to the cooling of the seemingly ever-robust market and also the withdrawal of many foreign buyers experiencing their own domestic woes.

But with the present development, which has seen UK leave EU, the analysts also see investors taking advantage of the weakening British pound and private investors to entering into the market with US dollars and taking advantage of the sudden dip in house prices.

While the Brexit concerns lasted, many projects in the UK slowed, but Adam Jones, operations director at Wrotham Windsor, a property adviser and real estate investment, says regeneration projects such as the Crossrail and other city and town upgrades will continue, and all of these increase the attractiveness of living in the UK.

Ideally, Britain does not have enough homes and because of this, demand is greater than supply, which always drives prices higher. Jones says that, in the short term, there will be a significant drop in market activity, both in sales and investment. “Buyers will wait for the prices to drop while sellers will hold their prices for as long as they can. Eventually, the two groups will meet in the middle, and the movement in price will not be as dramatic as forecast,” Jones hopes.

The London market, for instance, has succumbed to several market forces, including the government’s stamp duty measures over the last 18 months, the just ended Brexit concerns, and the withdrawal of many foreign buyers and has, therefore, been struggling like the Nigerian market that is weighed down by the combined impact of the country’s slowing economy.

“The current market situation in London is quite intriguing,” says Onyx Real Estate, London-based property consultants, explaining that in his Summer Budget and Autumn Statement of 2015, and the March Budget in 2016, the Chancellor introduced several new laws targeting property investors and second homeowners.

These laws include the abolishment of mortgage rate relief when calculating the taxable rental income (in effect from 2020), a reform of the wear and tear allowance, and a Stamp Duty Land Tax (SDLT) rate – 3 percent above current rates – that now applies to all second homeowners.

“You could even argue that these new charges are the consequence of short-term investors flooding the market, aiming to fix up a property and sell it on quickly at inflated prices, which would have deterred long-term landlords who have been priced out of a property which they could have owned in the first place. So, actually, if you are a long-term investor, you may already be at an advantage, as those who are in it for the quick buck will be put off by the returns on a short-term investment.

Jones agrees, stressing that property investment is considered more of a long-term investment, rather than short term. “With this in mind, the UK outlook still remains strong and attractive for investors as the pace of recovery will be quicker than expected because the British people will always need more housing”, it says.

CHUKA UROKO