BREXIT AND THE WINDOW OF OPPORTUNITY

Written by abuther Al Saraj (Director)
Thursday 9th July 2020

The Collaborative London is a specialist residential property development company fully focused on securing lucrative distressed property in Prime Central London (PCL). We have a combined property market experience of over 35 years and a proven track record of securing some of the best property deals in Central London. 

There is no doubt that Brexit has created a climate of uncertainty, which has affected prices of property in Prime Central London. 

In this article, we have analysed what the effects of Brexit are on the PCL property market so far and outline our view of where the market will be heading.

 

Property Market after General Elections

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There were indications that the dark clouds of uncertainty were beginning to lift with the General election which saw a Conservative government re-elected with Boris Johnson as its leader in December 2019. This was an indication to the market that the impasse on Brexit has lifted and the reaction was apparent as the property prices in London rose significantly. 

The Rightmove house price report, which tracked average asking prices in the London from mid-December, saw the most significant monthly rise ever recorded in January, pushing the average to £612,500 – an increase of 2.1 per cent.

 

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The UK finally exited the European Union on 31st January 2020 following which they will have an 11-month transition period where they will stay in the Single Market and Customs Union until the end of the year to allow time for trade negotiations.  

The trade negotiations can go either way. There can either be a tough Brexit or a softer style Brexit with an agreed trade agreement. In either case, property prices have already factored in for the Brexit uncertainty and for the taxation changes which have taken place over the last five years. (In figure 2 we see that Prime Central London Per square foot values in 2019 compared to the five-year average showing a discount in prices). 

The uncertainty factor in the market can be seen from the relative certainty which came post the general elections as overall sales in prime central London was 14% higher in 2019 than in 2018. They were also the highest Annual total since 2014 (Source Knight Frank Report). The reasons for this increase in activity came from mainly a relatively slow global economic backdrop, ultra-low mortgage rates and that prices discounted to take into account the uncertainty and change.

 

Investing in London

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Despite the doom and gloom in the market currently, London remains the capital of Safe Havens where International high net worth investing in storing wealth. 

Furthermore, London’s Economic fundamentals mean that it has been able to weather the storms of the past just as it will overcome the clouds of Brexit which have loomed over property prices.

As the storm passes and certainty begins to take hold the opportunities for great deals will become diminished. Knight Frank has predicted that in prime Central London property prices will increase by 18.5% cumulatively in the five years up to 2024. 

Pent up demand may also be released in the short term as in second quarter of 2021 new stamp duty changes are introduced which mean that it will become more expensive for overseas buyers to buy property in Central London. 

The Collaborative London’s View

At The Collaborative London, we view the current economic uncertainty as a window of opportunity as we can secure the highest discounts and opportunities to our partners. We have the expertise, experience and network to be able to select and develop properties in Central London which have a resilient value and can withstand the turbulence in the market. We focus on buying lucrative distressed properties in prime Central London which can be developed and sold within two years. 

We are not just interested in waiting for market increases; it is for this reason that we always price in the future sale value at today’s prices, which means that as the market improves the profit element increases. 

‘Don’t wait to buy real estate. Buy real estate and wait’. – Bill Rogers 

Those who take advantage of this period of uncertainty will make the most profit. We strongly advise our property investment clients to buy in this market but with a few rules: negotiate well, buy-in strategic locations and try to take advantage of cheap finance.

In March 2020 Brexit was thrown into the shadows by an even more significant threat the COVID-19 virus, this has put Brexit on a political back burner as dealing with the COVID crisis becomes the Government’s priority. To read more about what the effects of COVID will be on Central London house prices, please refer to my colleague Jaffar Al Saraj article.   

Get In Touch

The Collaborative London is fully adhering to the government guidelines surrounding COVID19. 

Following the government guidelines released on the 13th May 2020, we can confirm that we are now back at work and fully compliant with the social distancing measures required. 

We are keen to purchase lucrative deals for our Collaborative partners and welcome you to book in for any property viewings. If you want to discuss PCL property investment get in touch and let’s talk property.

In the meantime, stay alert and stay safe.