As a London-based property recruitment specialist, we were shocked when the referendum led to a narrow victory for Brexit. The majority of London had been swayed by the Remain campaign, with 60% of the capital voting to remain in the EU. However, the rest of the UK saw more value in the Leave campaign, leading to an overall majority of 52% for the exit vote.
The effects of the referendum were felt almost immediately as the pound suffered the most severe one-day drop ever seen, and eventually fell to a 31-year low. As a result of this, many experts within London’s property market have seen deals stalled or even cancelled as confidence in the market remains wobbly.
However, the Brexit vote seems to have had a positive effect on the amount of foreign investment heading into the city. While some believed that a vote for the Leave campaign would deter overseas investors looking to profit off London’s commercial and residential markets, it actually did the opposite. The falling pound has experts anticipating a drop in housing prices, with KPMG forecasting that housing prices could drop by 5% nationwide, and in London even furthur.
Seeing as London house prices are among the most expensive throughout the world, current exchange rate may have given foreign investors who are not paying in sterling an opportunity to increase their buying power and negotiate better prices.
James Roberts, Chief Economist at Knight Frank wrote in a report:
“A fall in the value of sterling, combined with falling property values will be a buy sign for opportunistic overseas investors”
Some properties are already being snapped up, with investors from overseas quickly capitalising on the exchange rate. The day after the referendum, the FT quoted a Chelsea-based estate agent who had agreed on the sale of a house in affluent Belgravia. It was reported that through the opportune timing, the Italian buyer managed to save 12% on the listed price.
While there may be some uncertainty around the property industry at the moment, it is certainly an opportune time for foreign investors to find a cheaper route into the London market. However, there is still a housing shortage which is leaving a high requirement for property in the capital and after the dust of the referendum settles, we would expect prices to once again be dictated by supply and demand.
From a property recruitment perspective, we imagine that Brexit will provide opportunities for those well versed in international property transactions and those looking to enter the sector should aim to widen their skill set in this area.
Long-term, some Brexit commenters have suggested that UK house prices in general could remain subdued, which might boost the first-time buyer market and increase demand at the lower priced end of the market throughout the UK.
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