Richard Carr on the changing face of property investment in Britain

It was inevitable that some uncertainty would arise due to the Brexit vote in 2016. And while this once looked like it would threaten to overshadow the property market in the UK, experts are beginning to agree that momentum will pick up when we finally leave the EU in 2019.

Recent forecasts by KPMG Economics say that they expect to see a pick up after Brexit, but that it’s also not the only factor affecting the property market. Understanding the wider economic, legislative and changes to tax gives a much more rounded picture of the market and moves away from the doom and gloom predicted by many in the wake of the Brexit vote.

Other factors to consider

Investors should watch out for changes to currency and interest rates, property taxes, economic growth and changes to housing policy as we go through 2018. We should also look for macro trends and the country’s capacity to attract businesses and investment from overseas, as these will always affect current and future property developments.

Initially it was feared by many that London would drop from its position as a leading financial hub globally. We’re now seeing that it’s not expected to be dramatically altered by Brexit, which means that property prices in London and elsewhere should hold firm.

Multinational businesses staying

A great example that validates this analysis is Deutsche Bank signing its new lease for a London-based HQ last August. Other major foreign companies that have recently signed office leases include Apple, Facebook and Snapchat.

London also attracted record levels of overseas investment in its Fintech (financial technology) sector in 2017, knocking China off the top spot. The city’s reputation as a European tech hub doesn’t seem to be going anywhere.

The property sector in the capital has been unique for a long time, as it serves as a centre for foreign investors as well as to the demands of its local population. And the weak pound since the Brexit vote seems to have offset any major slowdown in foreign investment.

Property markets boosted

The focus on London’s strength even during times of uncertainty has a knock-on effect for regional markets across the UK. We should see property markets outside of London boosted this year, helped by Crossrail, Thameslink and HS2. For example, Reading is continuing to attract investment and secure growth for developments due to the Crossrail link to London and a strong tech economy. An increased number of building permissions have meant delivery of more than one-third of new housing stock.

Further north, second tier cities like Sheffield, Liverpool and Manchester should benefit from Northern Powerhouse government initiatives.

Changes in buy-to-let market

Major taxation changes have led to significant change in the buy-to-let property market. Higher stamp duty charges on second properties came in 2016, and lending declined significantly. It’s likely that there will be a further decrease throughout this year.

In addition, tax measures for buy-to-let landlords will reduce the interest offset on the mortgage that can be claimed back. Overall, the effect of these changes will make it unprofitable to manage highly leveraged buy-to-let properties.

Challenging year

It looks like the property market will be exciting during 2018, and it could see significant changes such as the decline of the everyday landlord and a change over to new ways of utilising technology for residential property exposure.

As Brexit fears continue to subside, the future is full of optimism for the UK’s property market.

– Richard Carr

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