What impact will the Referendum in June 2016 have on the Residential Property Market?

Well, the Referendum will, unfortunately, bring some uncertainty in the three to four weeks, before and after, the chosen date (which looks like June 23) and this is never a good time for positive decision-making activity particularly if the Polls are looking favourable for a Brexit.

Unfortunately, I fear that the Great British Electorate has not learnt the lessons from the last Election (May 2015) where Polls consistently misinterpreted the underlying feelings of the populace and, therefore, reached the wrong conclusion and may well do so again this time.

If we remain ‘In Europe,’ needless to say, nothing will really change and I predict that the market for property up to £1million will carry on very nicely (thank you) with growth of circa 8% per annum, urged on by the government’s Stamp Duty ‘bribes’ in this sector, before the Election contained in the Autumn Statement of 2014.  Activity in the middle market and prime/super-prime sectors will continue to be dampened by the aggregate affect of Stamp Duty ‘hikes’, fiscal changes to Non Doms, ATEDs, oil price drop, the gyrations of world stock markets and the general slow down of the World Economies.

In this sector, illiquidity is a major problem where the numbers of transactions are down by up to 50% or more in London.  Underlying prices will continue to ease by about 10% per annum as the number of available properties overwhelm the dwindling pool of ‘real’ cash buyers around at any one time.

Thank goodness that with oil prices remaining low there is no upward pressure on inflation and, therefore, Mr. Carney can be put back into his ‘little box’ since Interest Rates (and therefore Mortgage Rates) are not going to rise for a year to eighteen months or so.

The real question is, ‘How will Brexit affect the Residential Property Market in London and the UK?’

In the months following the Referendum it would take a little time for the Great British Public to digest the ramifications of being outside of Europe.  David Cameron will be ‘the walking wounded’ for a while and in all probability will bring forward his retirement plans earlier than he would otherwise have liked.  Whether the new leader will be Osborne, or more likely Boris, will be the question on everyone’s mind.  Whilst this will generate some uncertainty at first, once it settles down, there is no reason to believe that the prevailing economic policies will change very much although, I am sure, if it is Boris, he may want to ‘stamp his mark’ by way of nuances to existing polices. Let’s hope Stamp Duty is one of them.

The point being that I firmly believe that there will be inward investment from multi-national companies and investors (such as Nissan, Honda, IBM, Ford, Google, Microsoft etc.) who will want to benefit from the new Social Contract and relaxed labour laws that will be introduced in the period after the Referendum that will enable the UK economy to ‘spin faster’ once it is free of the ‘shackles’ of European regulations which has served to slow our progress to date.

‘Operation Fear’ will make the Electorate believe that there will be an exodus of Banks going to Frankfurt from London but this is all nonsense as evidenced by the latest news that HSBC has recently confirmed (even before the Referendum) that its ‘hub’ will not move to Hong Kong as was much speculated hitherto.

The chances of Frankfurt becoming the new Financial Centre of the World is unthinkable ….. has anyone been to Frankfurt?  Let’s put it this way …. for excitement the average ‘Frankfurter’ leaves their home at 7.30pm ‘to watch the traffic lights change!’

Thatcher de-regulated London in the ‘80s and made it open for International business.  This allowed it to metamorphose itself from a souvenir Capital (rich in heritage as Paris is today) into ‘The Greatest City on Earth’ where the centres of excellence are all, very conveniently, in one place. Today, London is at the cutting edge of technology, couture, cuisine, culture, commerce and proudly boasts that it has the largest Financial Services Industry in the world.  As such, I believe, that we are, therefore, unassailable should the European countries want to prize this ‘mantle’ from us.

If under a new Leader the new Conservative administration is more sensitive to the ‘woes’ of property owners in London, then an emergency Budget could be arranged to try to address some of the more draconian measures that have been imposed to date.  Even if George Osborne becomes Prime Minister the new Chancellor may be able to have another look at the damage wrought on the middle-income groups that have become seriously disillusioned by the policies to-date since the Election.  Even the first time buyers have become disenfranchised by the growth in the property market at the bottom of the ladder and since the changes to Buy-to-Let fiscal legislation there will be fewer private rental properties available, with prices rising, as former landlords sell these investments which is a ‘double hit’ for them.

Private Pension holders feel that they have been betrayed by this, and previous, governments and they are not ‘happy bunnies’ particularly if the present Chancellor ignores the lobbying which is now taking place and further restricts Tax Relief for pension contributions in the forthcoming Budget of March 2016.

I know that the Chancellor wanted to ‘cool’ certain parts of the ‘runaway’ property market in London, but as we all know, governmental intervention is notoriously ‘clumsy’ when they try to interfere with markets.  He probably didn’t appreciate the damaging affects of his measures on liquidity and even Stamp Duty Receipts that, paradoxically, despite the rises in SDLT rates, are down by circa 25%.  This exacerbates his attempts to reduce the Budget deficit this year (which is circa £73billion) that is already under threat by reduced Corporate Tax Receipts as a result of the slow-down in the UK Economy that is now taking place.

There are interesting times ahead of us but uncertainty undermines confidence and, as such, the sooner that we get this Referendum over and done with the better!  Let battle commence.
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