Complex though the topic may be, it’s beyond question that the world of property – like most sectors and industries – is facing some tough challenges as a consequence of Brexit.
It’s hard to ignore current issues surrounding the well-publicised supply chain crisis, for example.
Research from Knight Frank has found that housebuilders have suffered delays and rising material costs as a result of the supply chain crisis – which is, itself, largely due to Brexit-related labour losses.
Obviously, delays and increased costs aren’t optimal circumstances for anyone investing in such properties, and canny investors should therefore remain on the lookout for any Brexit-related issues that may impact their investments.
However, while property investors should absolutely try to factor the effects of Brexit into their decision-making, it’s important not to look at the subject short-sightedly. Bricks and mortar hold (and retain) such considerable appeal precisely because, to buyers and investors, it represents a stable and long-term benefit.
As such, it’s well worth foregrounding a comment made in CBRE’s recent analysis of Brexit and real estate: “the longer-term picture is more balanced,” they note, as “initial disruptions will fade.”
The challenging nature of Brexit in the world of real estate
What, then, do these “initial disruptions” look like in the property sector?
According to analysis by asset management firm Schroders, retail units are likely to continue feeling the challenges of a post-Brexit landscape, with many units becoming or remaining vacant and rents suffering as a result.
The firm goes on to note, however, that this challenge comes hand-in-hand with the considerable opportunity for conversions for those with the vision and expertise to replace obsolete retail units with (potentially much more lucrative) residential properties.
A similar set of challenges and opportunities are attached to the loss of freedom of movement – a change which has come to emblematise Brexit as a phenomenon.
Investors in student accommodation might, for example, find their investment threatened by the 50 per cent reduction (according to the University of East Anglia) in EU students this year.
This kind of problem isn’t insurmountable, however – it just requires a slight pivot towards more lucrative regions, for example by pitching such accommodation towards UK-based or non-EU students, filling the gap and securing the continuation of rental income.
As such, while Brexit does have its challenges, creative and canny investors will find new opportunities – not only to surmount these difficulties, but potentially to find new levels of return.
Brexit benefits for property investors
Besides, Brexit isn’t all about mitigating for disadvantages. While it’s easy to get bogged down by doom-and-gloom projections, these should be weighed up against the actual events occurring around us.
After all, five years have passed since the referendum, and nearly two have passed since we formally left the EU. Yet UK property is, in many ways, still flourishing.
House prices, for example, have – according to the ONS – increased by 13.2 per cent over the year to June 2021, representing “the highest annual growth rate the UK has seen since November 2004.” This is indicative of the robustness of the UK housing market – a pillar of strong investment. Not only is our current situation not without its merits, but Brexit is likely to hold some long-term advantages.
For example, the UK’s global tariff for non-EU goods could – once the dust is settled and supply chains return to some degree of normality – give the UK what the CBRE calls a “competitive advantage access” to non-EU goods, with positive implications for construction and development when it comes to purchasing materials like cement.
Making our own luck
Returning to the CBRE analysis mentioned above also allows us to take a broader view on Brexit and property – a view which presents Brexit, not as some kind of inescapable force, but as an opportunity that we can choose to shape and mould until it produces advantages.
As they put it, “disadvantages can be addressed” by “good government policy, and by firms reorienting themselves to new and faster growing markets than the EU.”
As we’ve seen, converting unprofitable units, turning to non-EU student tenants, and capitalising on favourable tariff changes are all examples of this kind of proactive reorientation at work.
As such, reflecting on the possible benefits and challenges of Brexit for the property sector allows us to realise how many of these possibilities can be influenced by leaders in the industry: we’re living in a shifting environment in which the right firm with the right attitude can enthusiastically lay claim to considerable long-term advantages.