Something I’ve been pondering for some time is what exactly are the consequences on the Selby housing market of staying in/leaving the EU following the referendum in June 2016. There seem to be pros and cons to support both possibilities as expected.
If we leave the EU, we can likely expect a tightening of immigration laws in Britain making entry into the UK harder for anyone not of UK origin. It remains to be seen whether these policies will apply to parties already residing in the UK as well as those currently overseas.
In someways this may have a positive effect in terms of over-population and will inevitably cool the market currently in the brink of a housing crisis as specified in my last blog. This ‘cooling’ is likely to affect the rental market as well as the sales market as demand begins to equalise with supply.
However, one potential drawback is if members of the EU do not have free reign to live and work in the UK, they will also be unable to bring their skills across, namely, in the construction sector.
In my last blog I highlighted how Mark Hayward, managing director of the National Association of Estate Agents, advised there being a shortage of tradesmen in the UK. A vast number of eastern European migrants seem to provide skills in construction. Should we exit the EU and tighten up our immigration policies, this could potentially even worsen the effect of house building in the construction industry and by extension exacerbate the housing crisis.
Furthermore, with the recent right to rent act which came into effect 1st February 2016, it became a legal requirement for landlords/letting agents to check tenants’ passport and immigration documents to assess their eligibility to rent property in the UK.
An addendum to this policy following a Brexit will likely include even more rigorous checks on members of the EU and Switzerland as well as members outside of EU zones meaning extra legislation on Selby landlords. With this and several other government plans over the last year, it is becoming increasingly difficult to be a landlord in today’s day and age.
In the Guardian yesterday (16th April 2016), George Osborne argued that a Brexit would in the long-run cause an increase in interest rates and hence mortgages. His argument was on the grounds that a decline in the strength of the pound sterling would result in increasing costs of imports leading to rising prices. This would mean the monetary policy committee may have to step in to avoid inflation from taking place. However as one might expect a certain degree of uncertainty, the Bank of England MPC will likely keep the status quo with the base rate at 0.5%.
If we were to stay in the EU, the markets would return to normal quite quickly. If we were to leave the EU however, it is likely that due to uncertainty, house price sales and volumes will decline over the course of the year. That being said, the Royal Institute of Chartered Surveyors have reported that expectations in house sales are already expected to decline lower than they have ever been since 2008.
Furthermore Rightmove have reported that interest from buy-to-let landlords has dropped to more than 25% compared to this time last year. How much of this is a result of the buy-to-let stamp duty changes and how much is attributable to a lack of confidence in the marketplace remains to be seen.
It is worth reminding ourselves that should we vote ourselves out of the EU, the subsequent impending uncertainty is only temporary and once the economy is stabilised and trade negotiations with other nations are met, property will still be a lucrative investment.
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