Published: 28th May 2019
Any investment strategy has to reflect both the investor’s goals and the situation in which they find themselves. This means that the relevant question is not whether a property investor should adapt their property-investment strategy to Brexit, but how they should go about doing so.
This will obviously depend on what form Brexit (eventually) takes. If it does turn out to be a soft one (“remain-light” as it has been called), then property investors might simply need to tinker a little around the edges. If, however, it turns out to be a hard Brexit then there are some probable consequences which may need to be addressed.
This may initially seem like bad news since increased competition typically leads to reduced supply and hence increased prices (and the supply of housing in the UK has been very tight for literally decades), but it may not actually be a huge issue since international investors often have a preference for commercial property, which is much less regulated than its residential counterpart. UK-based investors who also want to have all or part of their portfolio in commercial property should still be able to find plenty of opportunities, especially given that the UK not only has a major need for purpose-built student accommodation, but also a huge need for supported accommodation for older people.
In 2017 there were just fewer than four million EU-born migrants in the UK, which put this demographic group at just under 6% of the UK population as a whole. Even if we assume that all these migrants will leave (which seems in the highest degree unlikely), the fact still remains that the UK will still have a chronic shortage housing, including rental housing (and this shortage may be exacerbated if home-building programmes stall due to a shortage of labour). Indeed, it’s entirely possible that the demand for rental property will actually increase.
Everybody remembers what happened as a result of the financial crisis of 2008. Banks which had essentially fallen over themselves to lend money to anyone with a pulse, suddenly and publically closed their stable doors (even though the horse had long since galloped off into the far distance). It is entirely within the bounds of possibility that the aftermath of Brexit will lead to a similar situation, which will obviously benefit property investors who can purchase in cash and disadvantage those who rely on financing.
A mortgage is a long-term commitment and if you fall behind on payments, then you can literally lose your home. Given everything which has happened in the UK since 2008, it’s reasonable to assume that most people will have grasped this reality very clearly by now and may respond to economic turbulence by choosing to exit mortgages on their own terms (or not take them out in the first place) rather than stay put and take the risk of foreclosure.
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