With the EU Referendum fast approaching, economists warn of ‘enormous uncertainties about what the Brexit would entail.’ However, we believe that this uncertainty creates a perfect opportunity for investors to tap into the always-in-demand London market. There are a lot of positives to come out of these couple of months of perceived uncertainty.
In order to respond to questions from UK and overseas landlords, LIFE Residential held an in-house discussion with Investec, an international bank which offers asset management services. We invited Investec’s economist Chris Hare to discuss the impact of the so-called Brexit on the UK economy and property market.
LIFE Residential has 15 years of expertise in the London property market, and we think that regardless of the vote on 23rd June, the Capital will always remain an extremely desirable market both for local and overseas landlords.
There has never been a safer time for long term investment. The short term outlook is good… but the long term outlook is great.
There will always be a shortage of property, because in London we have the sovereignty, the Crown and Buckingham Palace – people will always want to come to London regardless of our membership of the EU.
Our company has seen a steady rental price growth over the last five years and we see no indication of any change – even if the UK decides to leave the EU and impose a cap on immigration.
THE INVESTMENT DEBATE
In our discussion, Nigel Carter, LIFE Residential Director pointed out that, “The population is increasing by 100,000 a year in London and is set to continue like this for many years to come. The vast majority of these people will need homes to live in and probably they will rent, which is great news for our investor owners.”
According to Investec, there is a lot of uncertainty surrounding what the UK’s relationship with the EU would be in terms of trade and financial services, immigration and general regulation should Britain decide to leave the Union. That uncertainty is stirring the economic waters.
However, Investec’s Chris Hare added, “Even though there are a lot of risks around the economy, this is not to say there are no fruitful investment opportunities even in the Brexit scenario.”
Scott Ayliffe, LIFE Residential Director or Sales and Marketing remains positive, “Bearing in mind how resilient and adaptable to any change the property market is, there has never been a safer time for a long term investment,” he said. “Prices will keep increasing over a period of time. Mortgage rates will remain low for longer, the population will grow whether organically or from immigration. Build and they shall come!
“The market in the UK is good and will remain to be even if there are testing components. The short term outlook for the sales market in London is good… but the long term outlook is great.”
THE VALUE OF STERLING
Scott’s view is supported by Investec’s claim that the ongoing discussion on whether the UK will vote to ‘Leave’ or ‘Stay’ in the UK is already making the Pound weaker. Their opinion is that in an event of a UK exit from the EU, the Pound might drop by as much as 20 per cent. “That could make it a good time to snap up property in London,” commented Chris Hare.
In addition, the Bank of England (BoE) might keep the interest rates lower for longer. He noted that, “The BoE would worry about the possibility of higher inflation because the Pound is falling, pushing up on the prices of imported goods and services The UK central bank would be likely to hold interest rates as it would be more worried about the drag on the economy from Brexit and the uncertainty it would bring.
“If investors are willing to put up with a more uncertain environment, the prospect of a weaker Pound and lower interest rates could spur investment from abroad,” said Hare.
ABOUT LIFE RESIDENTIAL:
LIFE Residential offer services in lettings, sales and property management. Founded in 2000 by Jonathan Werth and Jason Dienaar, who together have over 40 years property expertise, the company specialises in luxury new builds in London. And also manages over 3,500 properties across London. With 13 offices located across London, in addition to three international offices in Hong Kong, Singapore and South Africa, they employ over 140 dedicated members of staff who speak over 32 languages.