E Is Brexit Impact On The UK Property Market A Fallacy?

Talks between the UK and the EU on the withdrawal of Britain following Brexit have been reported to have hit a deadlock in the last few days. And on October 16, 2017, British Prime Minister, Theresa May was reported to have traveled to Brussels for a dinner with EU leaders in a bid to end the stalemate over Brexit. However, nothing is expected to be resolved in one sitting and process could take longer than anticipated.

When Theresa May triggered article 50 in March this year, many feared that this could potentially affect the financial sector of the British economy, especially the property market. This was perceived in anticipation of a decrease in foreign investment and expatriates, which would have affected both the residential and commercial property markets.

However, several reports and market data have shown that to the contrary, the UK property market has continued to demonstrate growth with a significant rise in the UK House Price Index.

The three months following the triggering of Article 50 were understandably unpredictable while the three before were relatively indifferent.

Generally, it is correct to say that during the first quarter of 2017, the UK property market barely moved as investors waited on the Article 50 decision, the same was reflected in commercial properties with London office rental rates remaining largely unchanged as reported by Prime Office Space. However, there has been a significant rise in the UK House Price Index over the last 2-3 months as demonstrated in the chart above, a fact that has surprised many.

In fact, some analysts believe that there could be a UK housing bubble that’s about to burst in the foreseeable future.

So, what exactly is behind the current rise in UK property prices?

First, the process for Britain’s separation from the EU is still ongoing and according to earlier reports, it could continue for the next few years. During this period, business transactions may continue as usual between Britain and various EU member states, which means that while the process may have some teething problems, there are still plenty of foreigners from the member countries eager to do business with Britain.