It’s now more than two years since the EU referendum, which was arguably the biggest political event (and some might say the biggest shock result) in Britain this century.

The seismic vote – which saw Leave emerge victorious by 51.9% to Remain’s 48.1% – has had a profound effect on Britain, Europe and the rest of the world as withdrawal proceedings have slowly but surely got underway.

With the country effectively split down the middle, Brexit has continued to be an incredibly fraught issue, with strong opinions on both sides of the debate. But what has the decision to leave the European Union meant for the property market?

A steady footing

  • Before the referendum plenty of concerns were aired about property prices falling off a cliff or a property crash of the like not witnessed since the height of the global financial crisis in 2008, but these worst case scenarios never came true. In fact, quite the opposite has been the case – with the property market, both residential and commercial, largely batting off Brexit fears and uncertainty and taking a business as usual approach.
  • Of course, adjustments were needed to cope with the new normal and the ongoing uncertainty has made some dents on prices and confidence – especially in London and the South East – but a disastrous slump and the idea of millions of people falling into negative equity was unlikely when you consider the current fundamentals of the property market.
  • While demand continues to outstrip the supply of homes, as is the case across the whole of the UK, prices falling drastically won’t be happening anytime soon, regardless of what happens next between Westminster and Brussels.

A leading investment class

  • Part of the reason for the property market’s robustness in the face of external challenges – the referendum, the snap General Election and global economic uncertainty, etc – has been its status as a leading investment class.
  • In times of uncertainty investors gravitate towards safe havens, avenues that are likely to provide security and stability in the short, medium and long-term. For a while now, in fact, property has proved to be a far more reliable bet than more traditional forms of investment such as stocks, shares or bonds.
  • The weakness of the pound – a direct consequence of Brexit – has also been to the advantage of overseas investors, who have used the fall in sterling and favourable borrowing conditions to invest money in both commercial and residential property in the UK.
  • Strong investor sentiment was backed up by a survey carried out by Market Financial Solutions (MFS) at the beginning of this year, which revealed that 53% of investors would prefer to direct their money into traditional assets such as property rather than newer, riskier avenues. It found that 63% of investors see property as a safe and secure asset, with the ability to generate and deliver solid long-term returns.
  • As a contrast, the UK stock market has been up and down of late (in the first quarter of 2018, for example, the FTSE 100 Index dropped by 8.3%) and has been more affected by Brexit than the property market. Traditional savings, too, are currently hard to get good returns on thanks to very low interest rates (still held at 0.5%).

Strong price growth

  • The continued strength of the property market has perhaps best been shown by the consistent growth in average house prices in the two and a bit years since the Brexit vote. Despite recent price drops in London, the average UK house price stood at more than £226,000 in April 2018, 3.9% more than the year before and 6.6% higher than June 2016 when the referendum took place.
  • While this is partly reflective of the supply-demand imbalance, it also highlights the stability offered by the property market and the confidence people place in it. Buyer confidence has remained high despite various challenges.
  • There was definitely an impact on transactions before and immediately after the referendum, as people took a while to adjust to the post-Brexit landscape. But transactions soon got going again and have remained fairly consistent since.
  • While the rate at which house prices have grown has started to falter in recent months – with supply narrowing the gap on demand in certain areas – prices have still been rising in a steady manner since June 2016. There is also nothing to suggest this will change in the foreseeable future, even if price growth continues to slow.

Private rented sector thrives

The fact that the private rented sector now accounts for 20% of all households in the UK and is the largest form of housing tenure in the capital, says it all about its recent growth. It’s predicted to rise to 24% of all households (or 5.79 million people) by 2021.
As well as a large number of millennials, there are also a rising number of middle-aged renters, tenants with young children and retirees opting for a more flexible lifestyle.

There were question marks over how changes to the rules regarding free movement of people might affect the rental market – with workers from Eastern Europe far more likely to rent than buy – but as the end to free movement people hasn’t happened yet and the UK government is still negotiating its withdrawal from the EU, there has been no noticeable hit on the private rented sector from Brexit.

So, despite the uncertainty wrought by Brexit and the slight chaos (to put it mildly) surrounding the efforts to withdraw from a decades-long union, property prices and rents have both been rising and property is still being seen as a safe and reliable asset class.