We are leaving the EU... not the property market

After months of planning and speculation, Article 50, otherwise known as ‘Brexit’, was passed on March 29, 2017. Unfortunately for those seeking clarity, many terms of Brexit that will be affecting the property market are still undetermined. The media has been analyzing professional opinions and market trends to get a sense of what is to come. Through sources of research, we at Jeremy Jacob are sharing our short-term outlook of the London property market.

Foreign Investment as a Market Confidence Indicator

Foreign investment is an accurate measure of confidence for the property market. It demonstrates that investors expect property prices to remain stable or rise in the future. The Financial Times reported earlier this week how “’London property market will resist price crash’” due to high equity requirements for property purchases. The decreased percentage of leverage in the property market secures property ownership against future economic downfalls, though that is a sense of security amongst the grimmest outlooks of Brexit. A recent confidence indicator of foreign investment from South China Morning Post reports the optimistic London property market for investors. With future trade agreements with the EU still disrupting investor prospects, London property is largely unaffected by these agreements, thus making it attractive to invest in it for the time being. The demand will always exist for prime housing in the Kensington and Chelsea area, so investors are seeking this property as secure investment opposed to other markets. So what does our foreign investment post-Brexit report tell us: Kensington and Chelsea is a rock-solid housing market that will continue to attract foreign investors whatever opportunities or setbacks may come from Brexit.    

Residential Outlook for Luxury Leasing (£1.000+week)

Kensington and Chelsea property may have as great of an outlook as ever; marching into the wake of Brexit, however there is questionably a more cautious perspective from buyers/tenants. New trade agreements in the future have made multinational businesses wary of London, and are considering moving abroad. This has the potential to relocate many of the professionals that make up the Kensington and Chelsea market, which makes it a risky time to purchase property. In addition to the stamp tax increase last year of 3%, many professionals have turned to letting property for a short-term commitment until the effects of Brexit are more certain on their living conditions. Due to a decrease in property transaction turnover, landlords are leasing more which is increasing the supply. This attributes to a 5% drop in rental prices for luxury rentals over the past year making it an ideal time to let for tenants.

Mid Market Residents (£400-1.000/week)

The supply for mid market residents remains stable for the time being. Consider this market a more ‘local’ resident that is not as likely to move due to Brexit. London forms a unique market compared to the rest of England, with 25% of London letting agents reporting a decline in rental prices. There is also a ‘glut’ of supply in luxury rentals in the £1.000-3.000/week price range that may push landlords to lower rents. This can delve into the midmarket range if demand does not pick up in this area, giving the midmarket tenants a favorable position with many options to rent.

The Overall Prospect

So between foreign investment, luxury rentals and midmarket rentals, what can really be said for the property outlook of the Kensington and Chelsea market in the wake of Brexit? Well, Brexit will not produce the ‘world is ending’ or the ‘golden opportunity’ effect many were speculating - at least for the residential property market. Kensington and Chelsea is a unique market, attracting global attention to an already global city. Equity markets have made the area sturdy against any economic swings that may come in the future. Diversified international property owners will continue to find a stable value in the area when other markets may appear uncertain. As for the tenant, macro conditions have ripened a letting market for midmarket or luxury market tenants.