Where Does Brexit Leave Investors in the Property Cycle?

by Ruban Selvanayagam

14:36 PM, 22nd October 2019
About 4 weeks ago

Where Does Brexit Leave Investors in the Property Cycle?

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Where Does Brexit Leave Investors in the Property Cycle?

If you’re planning to invest in property in the UK, it’s important to consider the impact of Brexit on the property cycle and, in particular, on your position within that cycle.

In this article, the housing market specialists at Property Solvers will explain the impact of Brexit on property investors and their position within the property cycle.

The Property Cycle in Previous Years

The accepted pattern of market growth over time consists of a cyclical 18-year trend, divided into two seven-year increments and a third that is four years long.

This first seven-year portion sees a recovery phase, whereby market growth slowly begins to rise after a “recession”. This growth continues gradually, but a very slight dip in prices is to be expected at the close of this phase.

The second part of the cycle follows this dip. It constitutes an explosive “boom”, reaching a peak after around seven years.

There then follows a four-year recession phase. During this time, the market does not quite descend to the level at which it sat at the start of this 18-year cycle and, in this way, the market continues to grow in phases.

Brexit’s Impact

While we can expect the property market to follow this template to some degree for the foreseeable future, the uncertainty surrounding Brexit appears to have influenced a slow period for the property sector.

As a result, one might consider that the timescale of the typical cycle has been slightly skewed, with the period of recession or stagnation hitting early, but there is currently no indication that the pattern will fail to kick in as usual after this, nor that growth has been impeded in the long run.

Where Does This Leave Investors?

The impact of Brexit on your business depends on the nature of your investments. The experience of a buy-to-let investor or property developer will be different from that of an investor in new-build construction or large scale development.

Buy-to-Let and Property Development

If you work on a small scale perhaps as a buy-to-let landlord or property developer it may be possible to benefit from the knock-on effects of the UK leaving the EU.

This current slow period may prove to be a superb time to invest in new properties and spend time refurbishing or developing them. According to the typical property cycle mentioned above, it is highly likely that growth is due so growing your portfolio now may enable you to profit once the next phase of the cycle hits.

Of course, we are in uncharted territory. It is difficult to predict precisely when the next period of growth will kick in so if you are developing property for sale, you need to be financially prepared to “sit on” that property until the time is right.

Construction and Development

If your company specialises in new-builds or large-scale developments, it’s vital that you adhere to the government’s guidance on conducting business post-Brexit.

The better you have prepared, the less likely you are to be left behind as the country finds its feet outside the bloc. These preparations include:

  • Examining partnerships with all overseas contractors and suppliers and ensuring that they adhere to new legislation;
  • Understanding that some of your partner companies may struggle in a post-Brexit world and looking into other options to ensure that work will not slow or stop should the worst happen;
  • Educating yourself on any changed import costs and duties to ensure the smooth shipment of all materials from other countries;
  • Staying up to date on all legislation regarding materials, equipment, licensing, taxation, health and safety and any other factors impacting your sites and projects in case of any changes implemented by the UK government following its departure from the EU.

Every company has different set-ups and arrangements, and each project is slightly different, so it is up to you as a business owner to stay up to date with all post-Brexit changes.

Possible Eventualities

While the most likely scenario is that the property market will eventually pick up where it left off, falling back into its typical 18-year cycle, there are a number of other possibilities that should be considered.

  • Recession

Should Brexit result in a long-lasting market stagnation potentially exacerbated by wage cuts, job losses and an increased difficulty in the attainment of mortgages the typical cycle may give way to a lengthier and more severe period of recession.

While recovery is still likely, it may take longer than usual and be less significant.

  • Boom

Alternatively, the lengthy slow period experienced by the property market during Brexit negotiations may prove to have been a precursor to a sudden period of growth following the UK’s departure as uncertainty is considered one of the main influences holding the market back.

  • No Major Change

There’s no clear way of telling how long it will take the UK to “find its feet” after leaving the bloc. Because of this, the market may remain relatively slow for a number of years, without any major recession or boom.

Depending on the nature of your business, including whether it is based outside of the UK or has dealings with overseas partners or suppliers, the potential impact of Brexit on its practices will vary.

While the most likely outcome is that the property market will follow some semblance of its typical pattern throughout the coming years, you and your business should be prepared for any of the eventualities discussed above.

If you have any particular concerns about your future projects and investments, it’s very important that you check the latest updates online or make contact with the Department for Business, Energy & Industrial Strategy on either enquiries@beis.gov.uk or 020 7215 5000.

If you invest in property in a smaller scale and wish to sell any part of your portfolio, you can get in touch with the team at Property Solvers today. We specialise in exploring our clients’ real home selling options and offer both quick estate agency and fast cash sale services. We will be happy to assist you with any enquiries.



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