The official vote for the United Kingdom’s exodus from the EU has created an overarching sentiment of instability. Speculation and an uncertain future have driven down the Pound’s value to a 31-year low following the referendum, which has severely affected the real estate market and slowed down property development. However, this tumultuous situation also presents new opportunities to foreign investors and first-time homebuyers who are looking for investment properties while prices are lower. In this unique two-year period of EU exit talks, it is likely to be a buyer’s market of lower real estate prices and investment opportunities. Investors who act now can profit in the long run by taking some risks in a situation where many are still waiting to see how the dust settles.
How Brexit Has Affected the Real Estate Industry, Builders, and Property Developers
The UK’s Treasury predicts that over the next two years of uncertainty house prices could decrease by 18%. Although there are fewer homes available on the market due to less seller activity, Brexit has created an unusual situation where home prices are depreciating in spite of a limited inventory. Jonathan Hopper of Garrington Property Finders, comments, “In normal times constrained supply might drive up prices, but these are far from normal times, and a softening in prices is all but inevitable.”
In May 2016, the Office for National Statistics reported that the UK’s construction output fell by 2.1%. In addition, a group of Markit/CIPS purchasing managers completed a survey about construction in June 2016, reporting the slowest activity in their sector in seven years. Commercial property has suffered the most after investors snatched their money out of property funds in the wake of the referendum vote. This decrease in development and activity was to be expected in the wake of the UK changing where it stands in the worldwide community because, in times of uncertainties, many industries slow down: watching, waiting to see what happens next.
How long will this situation last, and how can property developers sell upcoming properties?
This period of instability can last up to two years since the referendum will trigger two years of EU exit talks. During these 24 months of negotiations, this feeling of instability and uncertainty is likely to persist, which is a driving factor in the pound’s depreciation and the slump in the real estate and property development markets.
In light of the virtual standstill from domestic investors who are ever vigilant of how Brexit will play out economically, builders and property developers should consider selling to a foreign investor who is not afraid of risk. Hamid Moghadam, who is the chief executive of Prologis Inc, is one of these international investors who views Brexit as a great time to reap, saying that “turmoil is an opportunity.”
Savvy investors know that buyers that act quickly after times of economic dips have scored great investments.
Interest From Overseas
Foreign investors see the dwindling Pound as an opportunity because its depreciation will make London property cheaper to invest in. An unprecedented favorable exchange rate not seen in the recent years is bringing in a new pool of buyers. Affluent families in Italy and France who are unsure of their place in the EU are looking for properties that they can fall back on in the UK. Investors from China, Singapore, and the Middle East are also showing great interest in investing in UK real estate and property development. According to the Wall Street Journal, Fosun Group, a Chinese conglomerate, said that it was likely to “proactively grab opportunities for value investments.”
In an uncertain future, there are still buyers who step up to the challenge for future gains.
When there is a problem, there is always a solution. Where there is a challenge, there is surely a strategy that can overcome it. Brexit has created an environment of instability by devaluing the pound and lowering house prices. This has been especially difficult on property developers, for whom there has been a near halt in domestic investment and real estate activity. However, there are still investors willing to buy during this time of uncertainty, taking advantage of a rare opportunity of favorable exchange rates. If foreign investors are willing to take the risk, then developers can be confident in a new pool of buyers for their upcoming properties.
Real estate agents can also join in this interesting occasion. Getting globally licensed helps real estate professionals help foreign investors in this post-Brexit era obtain property in the UK at great prices.