Contrary to initial fears, things are looking not too bad for the property market, writes David Alexander.
But while some politicians push for a “hard Brexit” and others try to delay, dilute or even overturn the referendum result, the private sector is quietly preparing for life after EU membership, whatever confusion there is about the eventual terms.
In the case of myself and my colleagues this means, of course, attempting to gauge the future of the property market and, contrary to initial fears (though a committed “Remainer” I have nevertheless accepted the result) things are looking not too bad.
A key word, we believe, is “confidence” and how this seismic shift in Britain’s social and economic position affects an abstract situation that is nevertheless hugely significant for our sector.
Most observers, including the more sanguine Brexiteers, have predicted that business confidence will take a knock after Brexit, at least initially, and this will obviously have an adverse effect on new-build developers. But the term “swings and roundabouts” also springs to mind; a booming market is not good for first-time buyers and any correction in prices is bound to help them, assuming supply remains at a reasonable level. Even first-time owners will, to some extent, be protected by a price correction as the large deposits now being demanded by mortgage lenders cushions against low or negative equity – unlike the days when 95 and 100 per cent home loans were common.
As for the rental market, there are still concerns among landlords that Brexit will lead to a mass exit of recently-arrived EU immigrants, whose presence here has greatly contributed to demand. I am convinced, however, that any final Brexit agreement will contain a clause allowing those EU citizens already domiciled in the UK to retain full residency and employment rights in return for expatriate British citizens being given the same.
This will be of comfort to landlords not just in Edinburgh and Glasgow, but also in the satellite towns around both, where immigrants have also largely congregated, to take advantage of lower rents.
Turning specifically to Edinburgh, I foresee the city becoming, post-Brexit, a magnet for people from across the UK, as to some extent it already is. And a significant proportion will want rented accommodation, at least when they first arrive. Edinburgh is one of a handful of cities and larger towns where quality of life means that location is even more important than the job – ie people will specifically target it as the place they want to call home and then try and secure a job that will enable them to afford to live there.
Moving north, Brexit has come at a bad time for Aberdeen, having coincided with a downturn in the oil industry (although there have been recent signs of prices starting to perk up again). True, the Aberdeen rental market has largely floated on oil for the last 40 years, but it is less well-known that before oil and the EU, the Granite City was a uniquely prosperous part of Scotland – buoyed by a rich agricultural hinterland, successful fishing industry, and highly-regarded education system. Notwithstanding some economic difficulties ahead, I believe Aberdeen – and its property market – will survive and prosper.
One of the biggest Scottish economic success stories in recent years has been tourism and many believe the market is still underexploited. One inevitable result is an increase in tourist-related employment in which case rental properties offering an acceptable commute to our two main airports, EDI and GLA, are likely to offer the better options for regular rental income and longer-term capital growth. The above are just a few examples or how the property market can cope with life after Brexit. Investors, however, will need to become more target-specific rather than just follow the money as has been the case up to now.
l David Alexander is MD of DJ Alexander