With the United Kingdom finally out of the European Union (EU), the real estate industry is apprehensive about the Brexit effect on the property market. The signs were not good after the results came in as the pound dropped to its lowest level since 1985 and Prime Minister David Cameron resigned. Uncertainty is also being felt as varied sectors become apprehensive now that Britain would have to make new trade agreements with the rest of the world.
A property expert in the U.K. earlier predicted that the Brexit could cause Britain’s housing market to dip. This would mean lower rents for Australians visiting the U.S. Xavier Wiggins, Investorist’s Europe director said the already unstable housing prices in Britain would fall which could result in uncertainty. He added the decrease in house prices would be beneficial but only for the short term. Wiggins also pointed out that affordability remains a problem and renters continue to rise as many people are having difficulty getting on the property ladder.
As Britain’s housing market declines, there is a likelihood that Australia will experience the same fate. Domain Group, for example, foresees that rents could go down as people leave to escape the financial uncertainty. Realestate.com.au, for its part, believes that an unstable U.K. market will put the limelight on Australia as a more stable property destination. London is considered a major market for property investors from Asia-Pacific.
One of the major benefits of Britain’s exit from the European Union is the decrease in rents particularly in the U.K. But the consequences outweigh the benefits, according expats who have lived in London.
Effect in Australia
In Australia, real estate experts are seeing stiffer competition among foreign and local investors. They say those already having a hard time to buy a home are likely to face more demand from opposition buyers. This, in turn, would result in higher house prices. In Sydney and Melbourne alone, home values have also risen by 13.05 percent and 13.9 percent, respectively in the past year.
Effect in London
In London, domestic buyers pull out of the property market while foreign investors are buying property. Buyers from China, Middle East, the U.S., Africa, Italy and Spain have been contacting estate agents to find out about bargain properties after the pound dropped to its lowest level in more than 30 years. Experts noted that foreign investors see the fall of the Sterling as a buying opportunity.
The U.K. voted to leave the EU on June 24 via a referendum. The Sterling immediately fell when the results came in and people were in a panic mode.