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Posted by: dezrezsysadmin - Wednesday, November 2nd, 2016
Before the in-out EU referendum of 23rd June 2016, there was a great uncertainty over the impact that each outcome could have on the UK economy, including the housing market. There were questions over whether the result would bring about a crash similar to that of 2008 with economic instability and political uncertainty. The first quarter of 2016, saw sterling weaken against other major currencies, and in the weeks before the vote, there was an obvious stagnation in the property market as homeowners and their potential buyers worried about what would follow.
The concept of the Brexit vote, also saw the British political system become quite tumultuous. Brexit was an extremely divisive topic with politicians from different parties forming allegiances with one another to create the two camps ‘remain’ or ‘leave’.
The impact on the housing market was one of the major concerns for people prior to the Brexit vote. It was a fear that if Britain voted out of the EU, there would be a significant decrease in foreign investment. This could have great implications on areas such as London and the West Midlands, where the percentage of housing owned by foreign investors is high.
For example, Savills estimated that in 2013-14, only 68% of those buying in the prime London market were UK nationals. There was also the concern that less construction of new properties would be taking place, as almost 5% of the UK’s construction workforce were born in other European countries. Furthermore, there were worries that there would be less demand for housing as immigration levels would be lower and thus fewer people seeking accommodation.
The only silver lining that could be seen throughout this was that building contractors would be forced to compete for work which would lead to more reasonable pricing, and better quality housing. There was also a lot of political scaremongering prior to the poll, with the Treasury predicting that prices could have been anywhere between 10-18% lower than base level projections by 2018. In general terms, it was known that land law would not be affected by either result in the referendum, as it comes from domestic legislation rather than the EU.
Therefore, Brexit would not affect real estate transactions in the legal sense. In the same way, Stamp Duty Land Tax (SDLT) is a UK tax on property transactions and is not regulated by the EU. The major concerns of those in the property industry, were therefore focused on the barriers which would prevent investment rather than legal ones.