w w w. h e r a l d l a n d . n e t

NOW IS THE TIME TO INVEST!

23 June 2016 marked one of the historic acts of the United Kingdom, when they took a bold step in moving out of the European Union to build an economic future of self – determination and independence.

THE EXIT OF THEUNITED KINGDOM FROM THE EUROPEAN UNION.

It was certain the UK would have an impact leaving the EU on all areas of social, cultural and economic policy since, the UK joined the European Union Community in 1973. The European Union has been one of the major factors of influence all across the UK for the past 40 years.

As the media and markets react to the news of the UK’s exit from the European Union. This gives us an opportunity to analyse and discover the various prospects that are available for investors and how you can take advantage of this unprecedented polit-ical event.

In addition to the falling sterling, investors from all over the world still opt buying property investments in the UK especially those looking forward to invest in the buy-to-let private sector could capitalise further over a surge in demand for rented accommodation.

NOW IS THE TIME TO INVEST!

BREXITAND THE HOUSINGMARKET

In spite of the growing construction activity in the recent months, the number of new homes built in the UK every year remains way below than government targets, due to the industry not keeping up with the pace of the growing demand of the popula-tion.

The UK develops 210,000 households per year, according to the Department of Communities and Local Government (DCLG).

The shortfall of households has played a major part in the exponential increase of property prices, which has been on the rise faster than the regular income growth making the availability of home ownership nearly impossible for many to afford.

As speculations circulate over the UK’s future in the European Union, many inves-tors and owner-occupiers opt to wait for the result before making a decision on their investments.

The current state of the UK Buy To- Let market remains strong with an increasingly scaling demand and a shortage of stock.

A Translucent and evolved legal system, a stable political system, unconventional education practices and healthcare services are all reasons as to why foreign inves-tors have been drawn to the UK’s housing market, and regard this as a state of ‘safe haven’.

Regional markets as well as prime central markets such as London have witnessed wide range of foreign interests in the recent years showing the UK as one of the key recipients of Foreign Direct Investments (FDI).

While the possibilities lie, when UK sees a period of weak foreign investments inflows, investors will still continue to find UK’s housing market as a safe investment as they understand the UK is attractive for a number of reasons and not only for its membership with the European Union.

The UK is still up for business and this is your perfect opportunity to grab hold of property investments in some of the most desirable and best connected areas.

UK Safe Haven Status

During the outcome of the Brexit, the value of the Sterling fell, marking more opportunities for UK property investors. At the time of the verdict that UK had voted to leave the EU, the reaction received from the news witnessed a downfall in the value of the pound, thus creating uncertainty for some investors but on the other hand an exceptional opportunity for international investors.

Ever since the referendum, the markets have continued to waver further low of £0.97 on 6 July, before fast-tracking a recovery at a period of greater political and econom-ic certainty.

Apart from Brexit concerns, currency markets have become calm as the pound bounced back to £1.02 on Wednesday 29th June, as the FTSE 100 surpassed its pre – Brexit high.

This is set to be a remarkable result for the short and long term prospects for the UK as the world realizes that the UK economy is not alone known for its role in the European market.

It’s a great time indeed for sterling buyers as they can take advantage of the cur-rency exchange rates by forward buying their currency at a given fixed rate without having the trouble to pay the full amount right away.

BREXIT & THE CURRENCY

EMBRACE INVESTMENT OPPORTUNITIES TODAY!

As the sterling begins to improve, the stability returns to the UK’s financial markets leaving innumerous questions for many as to what the wider economic implications of Brexit will be. The UK’s decision to leave the EU has resulted an economic impact in deciding the future success of the UK’s housing market.

UK is the fifth largest economy in the world, currently the sixth after the announce-ment of the referendum results and is expected to remain in its strongest position even post – Brexit. UK’s economy has globally seen a decrease in oil, energy and food prices whereas, the consumer and spending growth has been consistently growing strong from March 2015 to March 2016.

Hence, London is expected to lead the country’s growth once again in 2016 with a predicted growth rate of 1% all over the UK. On the job front, employment rates have set to reach 37 million by this date with education and health sectors rising above the growth chart. As number of debates arise due to how Britain’s exit from the EU will affect the economy, was an important feature in both pre – referendum cam-paigns, but expert analysts have offered their own projections for the future of the UK’s economy.

Open Europe, a non-partisan and independent policy Think Tank suggests two eco-nomic models that explains the extremes of where the UK might end up based on the discussion process.

1. The first model suggested by the Open Europe proposes the UK remains an active element of the European market and not bounded by the four freedoms of the single market that is goods, services, capital & labor.

2. The second model suggests that the UK becomes a part of the World Trade Organization rules to trade with the rest of Europe and redefine its trade position in comparison with the rest of the world.

If the UK abides to free trade and inherits a balanced approach towards the nation’s economic needs, the open market predicts the GDP to hike 1.6% by 2030, in compar-ison if the UK remained in the EU.

BREXIT & THE ECONOMY

After a series of speculations on the news of the Bank of England cutting interest rates and lowering the cost of borrowing subsequent to UK’s decision to leave the EU.

The beginning of speculation hinted the Bank of England remained on hold rather than following the lead of the US Federal Reserve and establishing the flow through incremental increases in interest rates.

The UK’s decision to leave the EU has resulted a change in the outlook of the econo-my in the country.Although interest rates remain consistent in the present, on August, the Bank of Eng-land indicated in their announcement that a cut in interest rates was a possibility with many expecting the rate to be cut to 0.25%. The current state of the UK defines itself as the net importer, where the import rate far exceeds exports, which relies on a stable sterling exchange rate in order to keep the costs of the imported good at an affordable level to the consumers.

BREXIT AND THE INTEREST RATES.

Due to the adverse impacts of the Brexit, property value growth declines and domestic property investors show a variable interest to switch to yield based assets.

House prices are set to rise at a slower pace than noticed in the previous years, as the UK still lacks housing stock.

Local investors take advantage of the strong capital gains over the years and it’s one of the main reasons that helps in forming the decision to invest in properties in some areas with a lower rate of yields but high in capital growth.

Due to change in recent market acts, local investors change course to investing in properties that give them higher yields.

Post Brexit, the demand for rental property and levels of supply remain stable as investors prefer to opt on rents instead of applying for mortgage schemes.

According to Nick Leeming, Chairman of Jackson – Stops & Staff states that, “De-spite the upheavals following the Brexit decision, the level of demand vs supply has remained broadly static UK – wide, showing that in the short term buyers and sellers are still being driven by the normal catalysts for entering the property market.”

BREXIT & THE PROPERTY VALUES

The decision of the UK leaving the EU referendum has seen a prominent political upheaval in the UK, however it has also created a ray of opportunities for shrewd property investors.

The result of the of the EU referendum has seen a prevalent change across the UK’s political landscape as Westminster prepares to challenge the future of Britain as a state outside the EU.

David Cameron the main advocate of the remain campaign, who recently stepped down as Prime Minister stated following the vote, he believes that a new leadership was necessary in representing the views of the public.

On 13 July, the day Theresa May rose as the Prime Minister, the Sterling stood at $1.299, which recorded its highest level since the pound dropped to a 31 year low on 6 July. This proves an outstanding opportunity for investors who held against the dollar to invest in the UK property.

Current Exchange rates states the affordability of property in the UK market has been accessible for global investors. With previous years’ declarations of properties in London being less accessible for investors, mainly due to higher property prices and lower rental returns than the rest of the United Kingdom.

Hence, the post Brexit landscape stimulates a wide range of opportunities for inves-tors.

BREXIT & THE POLITICAL LANDSCAPE

As exchange rates becoming favorable for sterling purchasers following Brexit, a wide range of opportunities have become accessible for international investors.

Shrewd international investors continue to invest in the UK market and have acceler-ated investments despite period of uncertainty, enabling them to take advantage of the UK market conditions.

A considerable amount of UK property agents has seen an outburst of activities following the decline in the value of the pound.

Predictions arise as UK is set to outperform other EU member states and the G7 countries by 2020 despite the short term growth in economic growth, according to HMRC and Nationwide. Hence, the UK is still open for business for overseas inves-tors.

Overseas investors take advantage of current market conditions, especially those buying in their domestic currency, with property prices being more affordable than before the referendum.

With rental values growing stronger along with the increase in the value of the pound in the medium term, international investors are expected to gain massively from buying during this period of uncertainty.

According to Nick Leeming, Chairman of Jackson – Stops & Staff states that, “De-spite the upheavals following the Brexit decision, the level of demand vs supply has remained broadly static UK – wide, showing that in the short term buyers and sellers are still being driven by the normal catalysts for entering the property market.”

BREXIT & INTERNATIONAL INVESTORS

At the wake of Brexit, mortgages prove to be an excellent option for first time buyers, cur-rent property owners and Buy To - Let inves-tors. Mortgage markets have responded well to the Brexit uncertainty by provide invest-ment opportunities for potential and existing property owners.

The outcome of the Brexit vote has made owners and investors search for a safe haven to store their funds particularly, Government bonds also known as gilts, have provided a solution. Due to decline in the rates of lending money, mortgage provid-er’s now get to provide extremely competitive fixed rates to their customers.

The Brexit vote gives landlords an opportunity to benefit from their properties on the basis of their rental returns. In cases where, the house prices decline more quickly than the rental rates, which shows an added advantage for landlords to attain a mort-gage, as rental returns cover more of the interest payments against the property.

As landlords focus currently on attaining high rental returns instead of increasing property values. The location of property investments has become more significant as ever.

With funding becoming a crucial element to obtain, locations that offer high rental returns for lower property rates are expected to become increasingly important to property buyers across the investment globe.

Property forecasters predict areas like the Northern Powerhouse are expected to become targets for property investors as they pursue to enter promising markets at the ground level.

BREXIT & MORTGAGES

As the UK prepares to create a place of its own in Europe, there are a wide range of opportunities for investors on offer in a post-Brexit Britain.

UK’s decision to leave the European Union may have come as a shock to much of the market, but on the bright side, embracing this uncertainty gives plenty of oppor-tunities to be found within the market today.

On the other hand, the fluctuating value of the sterling and decrease in mortgage rates offer exceptional opportunities for investors looking for purchase now.

These factors define that the UK property market is still up for business and is due to become more affordable in the short term due to market reactions and decrease in house price growth. This opportunity not only applies to domestic investors but also international inves-tors looking forward to capitalise at this time.

In the long run, the market success will be greatly influenced by the ongoing nego-tiations with Brussels, as the UK competes to attain an opportunity to build stronger economic and trade system away from the restrictions of the European Union.

As new economic orders set down for the next few years, the continued undersupply in the housing market and the growth in the national population will remain decisive for investors in the future, providing a wide range of opportunities for property inves-tors looking forward to embrace Brexit.

REFERENCE

Prinvest UK. (2015). Retrieved from Prinvest UK - Property Investment Specialists: https://prinvest.uk/property-market-investment-guides/embracing-brexit

Images: www.Shutterstock.com

SUMMARY

Herald Land Real Estate Brokers LLC.Dubai Land Department Registration (RERA) No. 661

Office 103, Building 2, Emaar Square, Downtown Dubai, PO Box 9243, Dubai, UAEPhone: + 971 4 440 3100 | Fax: + 971 4 440 3150 | Email: info@heraldland.net | www.heraldland.net