Brexit clouds outlook in housing market

By
/ EdgeProp
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December 28, 2018 1:26 PM SGT
The uncertainty over Brexit has taken a toll on the UK housing market, both in terms of sentiment and transaction volume. “The housing market in England and Wales has seen a slowing in both transactions and price growth since early 2018 and these trends are gathering pace as the end game for the Brexit negotiations has moved closer,” comments Liam Bailey, Knight Frank’s global head of research. “The prime market in London has been particularly affected, with transactions lower by 20% in October on a year-on-year basis.”
Prices have largely adjusted for the stamp duty hike, which was introduced in 2014. The result is that the average price fall in prime London was 15%, while transaction volume has plunged 40% since 2014, according to an Oct 12 market comment by Property Vision, a UK-based property buyer advisory firm.
The average price fall in prime London was 15%, while transaction volume has plunged 40% since 2014 (Photo Credit: Bloomberg)

Holding back

The mounting uncertainty in the Brexit is- sue has made potential homebuyers, including investors from Singapore, more cautious, says Doris Tan, regional director of Strawberry Star, an international property company.
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Tan is a 30-year real estate veteran, specialising in marketing overseas, especially UK, property in Singapore. “The UK property market is in limbo, with little direction for investors and owner-occupiers. Potential home- buyers have therefore held back on their purchases, preferring to rent instead.”
2018 was a year of two halves for UK property launches in Singapore. “The first half was strong, with many launches,” says Tan. “The second half was slower, owing to uncertainty over Brexit and the UK economy. The British pound has also fallen sharply as a result.”
Developers with projects in the UK will continue to showcase them at roadshows in Asia next year, as buying interest in China and Hong Kong remains healthy, says Tan. “Singaporeans have perhaps either over- bought in London, or feel that it’s time to take a breather.”
Owing to the dearth of sales in Singapore in recent years, some UK developers have scaled down on weekend roadshows here. This has, in turn, taken a toll on some of the international property consultancies. While JLL, Straw- berry Star and One Global continue marketing UK and other overseas projects in Singapore, others have reduced the size of their international property marketing teams, observes Tan.
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Birmingham — regarded as the second fastest-growing UK city in 2018 — topped the list of investment hotspots in 2019 (Photo Credit: Seven Capital)

Buying opportunities

However, the UK market still presents buying opportunities, especially in regional cities, adds Tan.
This is in line with the investment hotspots in 2019 identified by UK developer Seven Capital, in a release on Dec 11. Birmingham — regarded as the second fastest-growing UK city in 2018 — topped the list. Its current population of close to 1.15 million is expected to grow by 13.5% to 1.3 million over the next 20 years. Property prices are said to have grown 36.8% since 2013.
Another catalyst is the High Speed 2, a high- speed railway that is under construction. It is expected to connect London, Birmingham, the East Midlands, Leeds and Manchester, and scheduled to complete in phases between 2026 and 2033. With HS2, London will be even more accessible to Birmingham.
Manchester is another investment hotspot. Its population this year was 545,500, and is likely to grow by 14% over the next 20 years. Property prices over the past decade have increased 27%, and have gone up 33.6% since 2013. In 2016, Manchester was voted “Best UK City to Live”.
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The third investment hotspot identified by Seven Capital is Liverpool. Its economy is considered the fastest growing in the UK, bolstered by flagship developments such as the £5 billion ($8.7 billion) Liverpool Waters scheme and the Regenerating Liverpool master plan. The plan is to bring 38,000 new jobs to the city and deliver 35,000 new homes by 2033, which will boost the population from 491,500 to above 500,000. Property prices have risen 23.5% over the past five years.
The other three investment hotspots in 2019 are Edinburgh, Leicester and Slough, according to Seven Capital.

Increasing interest from new buyers

Some investors may have become “sceptical” about the UK market, but others see the cur- rent uncertainty “as an opportune time to take stock”, says Tan.
While activity in the UK housing market has slowed, Knight Frank data points to an in- crease in registrations of interest by new prospective purchasers in London “to levels last seen in early 2015 — well before the EU Referendum”, says Bailey.
Political uncertainty is currently the single biggest risk for buyers and sellers, con- cedes Bailey. “Once this risk recedes, market sentiment should strengthen accordingly,” he adds.