Property investment and Brexit – opportunities are coming
As the UK heads towards the Brexit deadline, which is in March 2019, property investors may be forgiven for worrying about what follows.
However, there are indications that Brexit will deliver profitable opportunities and investment experts are talking up the prospect of the opportunities to come.
One of those property investors who is keen to exploit opportunities is the chief executive of Dubai-based Damac Properties who believes that Brexit will make London ‘an interesting opportunity for those wanting a long-term investment’.
Hussain Ali Habib Sajwani told the Bloomberg news channel why he thought investors should enter London’s property market now – he explained the city’s assets have ‘softened’ and are less expensive than entering when the market was at its peak.
In recent months, property prices in London, and in many parts of the UK, have seen the rate of property inflation slowdown.
Investors in the UK's residential property market
Indeed, 2017 offered something of a mixed bag for investors in the UK's residential property market with reports that one in three owners were reducing asking prices towards the end of the year.
However, the Office for National Statistics revealed that in the year to October, UK house prices rose by 4.5%.
Also, the rate of residential sales transactions has risen by 7.1% over the year, says HM Revenue and Customs.
These two statistics highlight that the UK’s residential market has strong fundamentals and will continue offering an excellent vehicle for investment purposes.
It will also offer more stability than other volatile asset classes, for example, the stock market and there are opportunities for delivering a sustainable income for an investor willing to learn more about their investment strategy and keep abreast of the political and economic landscape.
Potential property investors also need to appreciate that while the media focuses on London property prices, particularly at the upper end since these have tailed off, that's not the situation around the UK.
Growing numbers of property investors are leaving the capital
There's lots of evidence to underline the fact that growing numbers of property investors are leaving the capital and heading north to invest in cities such as Leeds, Liverpool and Manchester. Birmingham also delivers excellent yields.
One of the main reasons for investors switching their attention is that prices in many northern cities are much lower than in London and so offer the opportunity of capital growth.
As an example, one finance firm is predicting that property in Leeds will, over the next five years, rise in value by 29% and offer investors yields of 6%.
Another reason why investors are heading north and why they aren't put off by the potential of Brexit delivering a bad blow to the property market is that investment and development in the regions is picking up.
Leaving aside the government's ‘Northern Powerhouse’ project, Manchester particularly has vast sums of money being invested in projects that are delivering employment and helping to boost house prices.
As an example, the area around Manchester Airport is undergoing huge infrastructure change and investment which has had a ripple effect on house prices not only close by but within commuting distance. Wythenshawe has delivered excellent returns for investors over the last year or so.
Why the Brexit deal won’t have too much of an impact
Another reason why the Brexit deal won’t have too much of an impact on some northern cities is that the student populations there are growing. Look at the rapid growth in student numbers in Manchester, Liverpool and Leeds and these students bring various opportunities for property investment.
That's not just in converting family homes to accommodate students but also for purpose-built student accommodation blocks.
The other issue with Brexit is for employers to consider moving their operations outside of London as some begin looking further afield.
Again, Birmingham is attracting lots of investment and firms are moving their operations to take advantage of what the city offers.
One reason for firms switching their operations is that they could save around £20,000 per employee every year - that is an attractive proposition should Brexit have an impact on their day-to-day operations.
News for those investing in London property
But it's not all bad news for those investing in London property since the capital city will undoubtedly retain a central position within the world’s economy so will help fuel demand for homebuyers and rent renters as well.
There is no doubt the international investment will still flow into the capital, and as Hussain Ali Habib Sajwani said, the city will still deliver returns over the long term.
Also, with the pound’s depreciation against various currencies since the EU referendum, London is offering a very attractive opportunity for an international investor – and they are not just looking at prime locations but also for outer London properties too.
Industry watchers say that the speculation that the UK's economy will ‘fall off a cliff’ after Brexit will be ill-founded and there's little that will derail the country’s residential market.
It's unlikely there will be a financial fallout from the Brexit negotiations since the UK economy is strong and creating jobs at an astonishing pace. It is also still attracting workers from the European Union who will need a home to rent.
There will still be a big demand for rental accommodation
Essentially, there will still be a big demand for rental accommodation and investment experts say there's unlikely to be a huge reduction, whatever happens after Brexit, to meet this demand.
That’s a positive sign for investors and while Brexit negotiations will continue for some time yet, for those investors willing to take the risk now then the potential long-term rewards could very impressive indeed.
Finally, the last point to make about the opportunities that can be delivered for investors in the UK's property market post-Brexit is the fact the government is unlikely to risk causing instability by introducing new policies and will probably look to support investors and investment opportunities in the years to come.