The big date of 23rd June 2016 can be termed a historic date from several aspects. As the decision was to step out of the European Union, it is a fact that the nation has to write its fate alone. Undoubtedly it is a bold decision which will leave long-term implications and repercussions.
Experts say that as the things will clear with the course of time, the impact will be visible. The country is no more a part of the EU and from the price of GBP to employment policies and the stock market to realty sector; everywhere the effects will be apparent.
Property market is gloomy after the decision
If you look at the performance graphs post 23rd July, then it is clearly visible that market reacted with a great pessimism for Brexit. In fact, there is a dip in the demand for the month of May when rumors were rampant about the post-facto impact of Brexit. Pessimism started capturing the minds of people since that point, and the market weakened month-on-month after that.
Not only property demand, but mortgage approvals also subdued after May 201 and till date, there is no significant improvement. The data has been published by recognized and authorized sources, and there is no reason to disregard the figures.
The point has to be noted that there was a big boost in the market (especially, the second home market) at the beginning of the year because everyone was in a hurry to close the deal before the high rates of stamp duty get implemented. However, the surge quickly disappeared as people postponed the buying decision due to the decision on Brexit.
Decline and fall
Look at the nationwide figures and you will know that there is a constant decline in the growth of property rates. In fact, it is one of the lowest in the recent past. Property dealers say that inflation in the property rate is a history now. It is not only losing momentum but heading towards a negative growth. People predict that the following months would see a standstill market due to an estimated 15 to 20 percent drop in transaction volumes as far as London market is concerned. Even the overall UK market is also expected to drop by 5 to 10 percent average. Independent surveys also indicate that most of the people are in the mood to postpone the decision of buying properties. They feel that the money should be saved given the uncertainty of economies.
It will take a few months to see the actual impact
However, the real impact will be visible by next year when the real impact of Brexit will be visible on the real economy. Though some real estate experts feel that the market will not show a significant fall, it is not certain. There is only one aspect to substantiate this assumption; mortgage rates are quite low, and employment market is flourishing. It means people will have money to buy properties. Let’s see how the market moves?
Will Brexit result in increased interest of people in other property markets of Europe?
There was an overall slowdown in the European markets last few years. However, some experts feel that in the light of Brexit, people may get diverted to other markets. Expert economists fear that London is going to get the hardest hit. A significant drop in the transaction is expected in the coming times. Though there may be a little bit of moderation in the second half. Overall, the prices will increase by next year, but it is not certain.
Experts feel that people may get diverted to other markets such as Scotland or Germany. Properties in Scotland are sold by at least 3 percent lower than the UK. Hence, growth is anticipated after the referendum result of the European Union. Unlike Britain where average valuation was accelerated before the Brexit voting due to short of supply, prices falle in Scotland during the first quarter. In the second quarter, there is a drop and it is the reason people prefer Scotland market.
Not only transaction volume increased in Scotland during the last quarter, but it was the most active period as per experts.
Realty market will contribute to the Scottish economy more rigorously than earlier. It emerges as one of the strongest and most active markets. If we look at the properties available in areas such as Dunbartonshire (West), then there are no properties available three years back have been sold. Thus, it is amongst the best performing areas. The similar movement has been seen in places like Aberdeenshire and East Renfrewshire.
Since people find these newly emerging (or even old and established) areas of other countries lucrative, they don’t want to take the risk of investing in London where a great uncertainty prevails in the atmosphere. It is needless to say that the respective governments are also eager to reap the benefit by offering relaxed terms and conditions for foreign investors and offering low-interest, easy loans.
Post Brexit voting, Banks, and financial institutes hesitate for Buy-To-Let
As more pessimistic news coming in, further confusion is getting added to the situation. A major hit to the buyer sentiments force financial institutions and banks to rethink about the decision of offering Buy-To-Let options. There is only one possibility of holding back the sentiments if people don’t sell their properties for a year or so. It will eventually create a shortage of supply in the market, and there will be a gradual increase in the prices.
It looks, however, a difficult situation as of now because sellers are eager to sell their properties because of rampant uncertainty in the market. They want to safeguard their hard-earned money. Thus, supply-demand dynamics take a complicated twist, and the deadlock seems to continue for a few months.
It will be quite interesting to watch the twists and turns in the realty sector next one or two years. Certainly, Brexit will have a long-term impact on it.