How Brexit picture may lead to house price volatility
Brexit is one of those things on which nobody can truly agree. Even the central binary choice in the referendum of ‘leave’ or ‘remain’ were just starting points. Since then, talk has been rife of "soft" or "hard" Brexits, and about which out of an array of economic and trading models Britain may end up with.
Since much of this disagreement goes to the heart of government, it is not simply a matter of interest for the Westminster village. The kind of deal - if there is one - the UK leaves with will have serious implications for the strength of the UK's economy.
All this will affect landlords and letting agencies, as the economic outcomes could impact very specifically not just on the UK as a whole, but certain regions and areas. Indeed, it seems clear this is already happening in London, where the gloomy sentiment about the future of this pro-remain global city has coincided - only not so coincidentally - with one of the weakest property price performances of any UK cities in the past year.
However, sentiment seems more upbeat elsewhere. For example, the most recent Deloitte Crane Survey, covering activity over the course of 2017, showed a rapid building boom in Manchester, Birmingham and Leeds. Local sentiment over Brexit appears to make no difference; Manchester was as firmly pro-remain as London. Leeds was narrowly pro-remain, while Birmingham marginally supported leave.
Advantages for provincial cities
Notably, rental apartments made up a large proportion of the major developments in these cities, particularly in Manchester where the trend is evident both on volume and the visual impact of its growing plethora of skyscrapers.
Of course, none of these cities will be hit as hard as London if, for example, the UK financial sector is heavily disadvantaged by Brexit. Moreover, developments such as HS2, the Northern Powerhouse and Birmingham's role as the 2022 Commonwealth Games host may counterbalance any negatives.
Those least optimistic about Britain post-Brexit may suggest that these contrasting trends will actually bring about some of the rebalancing towards the regions that those feeling 'left behind' by globalisation may have sought by voting leave, but through levelling downwards, not up.
If the most pessimistic projections prove true, then indeed the rental sector may suffer. At worst, Britain may lose jobs and growth and become a less attractive place to emigrate to, not least for EU citizens who may feel unwelcome. Some Britons may decide the UK is a sinking ship and leave, not least the many who have obtained Irish passports to sustain their EU citizenship.
Projections of gloom
Much has been made in recent days of government documents indicating the UK will be worse off in any scenario, which were first leaked and then released by ministers, who then denied the situation was necessarily actually going to be so bad. These projections suggested it was, in fact, not London but leave-voting areas of the North-East and West Midlands that would suffer most. Perhaps it is there that landlords need be most concerned.
Of course, it remains to be seen just what the ultimate impact is. Much of the brake on investment is, after all, due to the sheer uncertainty of the wisdom of investing in the UK.
As an example, the national institute of Economic and Social Research has given a relatively upbeat assessment of the future, based on a 'soft Brexit' model with single market access and continued free movement. The alternative, it claims, would cost Britain six per cent of GDP a year.
For the rental sector, there may be little to do but wait and see what transpires in the next 13 months.