January 31 2020

UK Property & Brexit: What Happens After 31st January 2020?

January 31 2020

UK Property & Brexit: What Happens After 31st January 2020?

Author: Gareth MarshallCategory: Brexit & UK Property, UK Property
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With the UK no longer a member of the European Union, here’s an overview of what happens next – and what UK property investors need to know.

It’s official – the UK will no longer be a member of the European Union (EU) after today.

Three-and-half-years after the 2016 referendum, in which a majority of the British electorate voted to leave the EU, the UK’s membership of the now 27-member state union will cease at 11pm GMT on Friday 31st January 2020.

So, what happens next? And what does Brexit mean for you and your UK property investments?

We’ve answered some of the most common questions for property investors below:

What’s changed on Friday 31st January 2020?

In short, not much.

Yes, it means that the UK officially leaves the EU. All of Britain’s Members of European Parliament (MEPs) automatically lose their seats, with the UK now leaving of all the union’s political institutions.

The UK will no longer be involved in any future EU summits and will no longer be able to vote and make decisions over future EU decisions.

However, that’s all that’s changed – for now.

At the moment of Brexit, an 11-month transition period begins.

During this transition period, the UK will continue to obey all EU rules and regulations. For most, everyday life in the UK, along with trade and business between the UK and the EU, will remain the same.

What’s the transition period?

Also known as an ‘implementation period’, it’s due to last until 31st December 2020.

Effectively, it gives both the UK and EU time to negotiate the terms of the UK’s withdrawal from the EU and how the two parties will work together going forward.

A political declaration drawn up by both sides was agreed in October 2019, before it was granted approval by politicians in Westminster two months later. This declaration broadly sets out both sides aims and outline what the future relationship between the UK and the EU will look like.

Now, the transition period will allow time for talks to formally agree or amend the points outlined in the declaration.

Negotiations will centre around a future trade deal between the UK and the EU, along with other aspects ranging from law enforcement and data sharing, to electricity supplies and aviation standards.

UK prime minister Boris Johnson shaking hands with two EU diplomats in Brussels

What will happen after the transition period?

After 31st December 2020, one of three will outcomes will happen.

  • A UK-EU trade deal could come into force, whereby all agreed future trade regulations will come into effect immediately.
  • The UK leaves the EU without an agreed trade deal.
  • The transition period is extended, allowing for more time to agree a future trade deal.

What will happen to the value of the pound?

It will, of course, be interesting to see the performance of the pound against the US dollar over the coming days, particularly for those property investors based overseas.

However, over the last few weeks many economists have actually predicted that don’t too much should happen to sterling’s value immediately.

That’s because Brexit (more specifically, Brexit on 31st January) has been priced into the market. Ever since Boris Johnson’s Conservative party won a majority at the 2019 general election, it’s been widely accepted and expected that this would definitely be the date on which the UK’s EU membership ends.

“The passing of the Brexit Bill is all priced in by markets and so we should not see any movement based around that event,” Andrew Brigden, Chief Economist & COO of Fathom Financial Consulting, commented in the Telegraph.

Moreover, analysts anticipate that greater volatility in the pound’s value will happen over the course of the next 11 months, particularly as we near the end of the transition period and more is know about the future relationship between the UK and the EU.

How will Brexit now impact the UK property market and my investments?

Firstly, it’s once again important to emphasise that, right now, nothing has actually changed beyond the UK’s EU membership status.

It’s also important to remember that, from a property perspective, nothing has changed either.

Britain has a significant undersupply of property; around 300,000 new homes are need each year to keep up with demand. This has not suddenly changed.

The UK property market still remains one of the strongest investment sectors globally. In January 2020, UK property prices rose at their fastest month-on-month rate in history, as pent-up demand since the general election and the festive period resulted in increased activity in the market.

Property, and UK property particularly, is famed for both its stability and its resilience against wider economic factors.

In particular, UK student property was famously one of the few investment markets that continued to record annual growth in the years following the 2008 global economic downturn. A British university education has, and always will be, in demand from students around the world. This increases further when economic growth temporarily slows, with more students looking to gain the skills demanded by employers globally.

With rising student numbers, particularly from non-EU international territories, it’s fair to assume that demand for student property is likely to remain high following Brexit.

A shot from above Manchester city centre

Which UK cities are best for property investment following Brexit?

While, to date, Brexit has had a limited impact on the property market generally, it has affected the inflated prices in London.

Property price growth in London has continued its slowdown over the last three years, with Brexit – and what it could mean for businesses and London’s financial industry – prolonging the city’s poor property investment performance.

According to the Zoopla UK Cities Index, year-on-year price growth in 2019 slowed to 1% in London, compared with strong price growth in key regional cities.

In comparison, property in Manchester recorded average price growth of 6% during this time.

Between 2019 and 2023, average price growth in Manchester is forecast to reach 15%, versus a national average of just 11%.

Thanks to its thriving economy, coupled with a critical undersupply of property, over the next four years property investors in Manchester are forecast to achieve the highest annual and long-term returns of any city in the UK.

Download our free Brexit guide for property investors

Select Property Group has produced a new guide, Brexit & UK Property, which outlines what investors could expect over the coming months and years, along with the main investment opportunities created by Brexit.

Click here to download your free copy.

Cover of the 2020 Brexit & UK prroperty guide from Select Property Group

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