The Royal Institution of Chartered Surveyors (RICS) has looked at what the impact is currently and also assesses what the outcome of a leave and a stay vote might be.
It points out that its recent residential market surveys indicate a chronic shortage of housing across the UK. Residential investment transactions in the residential sector have slowed and limited house buying transactions across the house price spectrum.
‘This is not unexpected as there's usually a slowing of residential transactions before any national poll. After an election vote we typically see the residential sector recover and bounce back as stability and confidence returns,’ the report says.
‘Should the UK opt for a Brexit, we could assume that uncertainty could linger while the UK Government negotiates new trade deals and relationships with the EU and third countries,’ it adds.
The analysis report explains that the lower to middle priced property market is, in the main, directed by domestic participants so the uncertainty has had less impact on demand and house prices at this end of the market when compared to the higher end.
However, a significant number of higher end properties, particularly those in London and the south east, are purchased by EU and non-EU individuals and the report suggests that a Brexit could see less demand for higher end properties from these individuals, thus relieving pressure in demand for higher end residential areas. ‘We can, therefore, suggest house prices could decrease in the immediate to short term,’ the report states.
It also suggests that there could be an effect on student accommodation. There was over $6.5 billion of investment in the UK student accommodation sector in the first three quarters of 2015. ‘Changing higher education enrolment rules could deter international students thus affecting demand for student and PRS accommodation,’ it adds.
It also points out that the concern is generated by a series of unknowns for decision makers. There is risk generated by the debate in the lead up to the June referendum, uncertainty over the referendum outcome, uncertainty over the process for exit if it comes to that.
There would also be uncertainty over the renegotiated package if the UK remain in the EU and uncertainty over the exit negotiation period and potential trade deals.
‘Anecdotally, this uncertainty has already had an impact on decisions in property markets and heightened the perception of risk attached to the UK. Investors are hesitating, occupiers re-planning their footprints, and building pipelines are slowing,’ the report says.
It explains that the impact of the referendum has been likened to the uncertainty and risk created in domestic and FDI investments markets by General Elections, and the nearest comparator is the Scottish Independence referendum in September 2014. But RICS believes that the impact of the EU referendum is greater than those, as it fits with such a potentially large geo-political and economic shift.
‘While investor and occupier confidence were affected by polling results in Scotland, just as we are seeing in the UK now, property markets readjusted quickly following the No vote. RICS members expect the same resurgence across the UK if the decision is to remain,’ the report says.
It also points out that over the last quarter of 2015 and into 2016 it was evident that investment in property was slowing with uncertainty being one of the main drivers behind this and particularly relevant to decisions about long term investment in real estate.
‘Before any national poll there is usually a slowing of residential transactions. Potential home buyers generally delay their decisions to purchase a home and investors stall on completing financial commitments. After an election vote we typically see the residential sector recover and bounce back as stability and confidence returns,’ the report explains.
‘However, the outcome of Brexit could provide an alternate effect. The No result of the Scottish referendum saw a housing transactions recover in the immediacy and we would expect the UK to follow suit should the electorate vote to remain an EU member. Should the UK opt for a Brexit, we could assume that uncertainty could linger whilst the UK Government negotiates new trade deals and relationships with the EU and third countries,’ it adds.
