The economic think tank the Centre for Economics and Business Research (CEBR) has issued a very positive report on prospects for the UK property market. Despite the doom and gloom being peddled by some experts it seems that all is not lost for the UK property market in light of the Brexit vote. So, what can we expect in the short to medium term for UK property prices?
Short-term prospects
The report confirms that UK property prices increased by 5.2% in the year to July 2016 with the average price now standing at £205,715. While many would have you believe that the Brexit vote has brought the UK property market to a standstill this does not appear to be the case. Forecast growth in UK property prices is expected to hit 5.7% in 2016 and while this will fall to 2.2% in 2017 this is likely to be a much better performance than the U.K.’s European counterparts.
The only downside in the short term is that what many see as inflated London property prices are forecast to fall by 5.6% next year after which they will start to pick up again.
Recent tax changes
Many people believe that the recent increase in property related taxes is as much to do with the short term reduction in property purchase enquiries as the Brexit vote. It is also worth noting that many people brought forward property purchasers to beat the increase in taxation therefore leaving something of a lull from April onwards. While it would be foolish to suggest that the European referendum vote has had no impact upon investor sentiment perhaps much of this has been overdone.
Many media outlets have failed to pick up on the fact that potential sellers have pulled their properties from the marketplace leading to a shortage of suitable properties for those still willing to invest. This in itself should help to support property prices in the short to medium term while markets adjust to what will be a new world for the UK going forward. The chances are that the UK will still have access to the European single market being one of the largest economies in the world.
Labour market
A number of countries have already stepped forward to take their place in the queue to discuss direct trade relations with the UK in the future. Australia, New Zealand, India and even the USA are now set to pursue individual trade arrangements with the UK as opposed to a block arrangement with European Union – which can take years to resolve. The UK property market will obviously be impacted by the future shape of the UK labour market but at this moment in time there is no need to panic.
The forecast fall in London property prices could be seen as a deflating of what has been a very buoyant and potentially overvalued market. This will “blow the froth off the top” of the market with a strong core of buyers waiting in the wings. This report by the CEBR is the most positive yet after the Brexit vote and seems to be based upon sound economic assumptions.