Initial observations on the UK property market post Brexit from Boodle Hatfield (and it’s not all doom and gloom!)

It will be some considerable time before the real implications are fully understood.  Until the negotiations between the government and the EU are concluded, we can only speculate on how quickly the UK economy - and by extension the UK property market - will settle down.

No one really knows what will happen over the timeframe of the next five to ten years.

Is it possible to draw some narrow conclusions from what has actually happened to current transactions in the immediate aftermath?  Having collated our own experiences and spoken to other law firms and agents in the UK property market, we can report the following observations:

• In the days immediately following the referendum some transactions fell through or became the subject of price negotiations but slightly more proceeded to exchange of contracts without any price adjustment. We continue to receive instructions on new sales and purchases which indicates that there is still an active market.  In one case a slightly higher price was achieved after the Brexit vote than before.
• Within the domestic market, there are still buyers who need to move house for all the usual reasons connected to job opportunities, divorce, expanding families and so on. They may be taking their time in assessing whether the price they are paying still seems to be the right price but most are still proceeding with the transaction.
• The country house market has been less affected so far by the general uncertainty.
• Some London residents who anticipate being relocated back to the EU or elsewhere are considering selling their homes now in case the market later becomes flooded with properties being off-loaded.
• Many of those properties which have been languishing on the market for some time have not sold because they were compromised in some way; desirable properties which were best in their class have always been snapped up quickly.  The availability of desirable properties coming to market may increase if banks and other multi-nationals choose to relocate their centre of operations.
• The new-build market is facing a considerable oversupply and the potential for significant discrepancy between supply and demand for new-build properties has resulted in a drop in the share prices of some house builders and developers. Developers are offering discounts, so there may be opportunities for certain investors. This market has been an investment choice for foreign nationals from various parts of the world and the weakness of the pound is of course making properties cheaper.
• The rental market for existing newly built properties is holding up reasonably well but tax and regulatory changes may make buy-to-let less attractive.
• Overseas investors who are cash buyers are taking advantage of the currency window. While the value of the pound remains low in comparison to other currencies, particularly the US dollar, all the reasons which make UK property such a desirable asset for overseas buyers have just got stronger. In the light of these indicators, our overall conclusions at this early stage in the post-referendum landscape are as follows:
• Although the long-term picture for the UK economy cannot be predicted, UK property as an asset class will continue to attract investors.
• Uncertainty about what the future holds has affected fewer of the transactions we and others have been dealing with than we expected.
• The volume of transactions in the UK property market was already subdued as a result of existing factors, in particular higher and additional rates of stamp duty land tax (SDLT).
• Lending criteria is likely to be tightened which will make it harder for non-cash buyers to purchase. On the positive side, interest rates are likely to be reduced.  
• Overseas buyers are seizing opportunities before the pound recovers value.
• Some buyers will be able to take advantage of the SDLT relief applicable to purchases of six or more residential properties from the same seller.
• Taking good advice from experienced advisors is even more important than ever before for both buyers and sellers.

Boodle Hatfield LLP is a highly successful law firm which has been in business since 1722. They act for wealthy individuals, families, property owners and businesses in the United Kingdom and internationally.