From midnight tonight, housebuilders will no longer be building on European soil. Since bleary-eyed Britons emerged from the polls on 23 June 2016, housebuilders have been building on shaky ground. Now the die is cast, the property market is feeling decidedly chipper about the year ahead, with many reporting increased interest from buyers.
“After a tough year for the property industry, all the estate agents we deal with have commented on the dramatic uplift in buyers registering,” Bruce Burkitt, Founder at Property Experts. “The Property Experts team has also seen an increase in enquiries from people seeking investment and development opportunities with a number of our existing clients committing to expanding their portfolios, now that Brexit is coming to a close.
“This year we expect to record strong sales figures as our developments come to completion in a more buoyant marketplace. I hope that the government will further the pro-property attitude with new incentives in the Chancellor’s March Budget, especially with the Help to Buy scheme being reformulated from next year.”
But with only 12 months to negotiate trade agreements that typically take 4-9 years to come to fruition, will developers have the workforce, resources and government support to meet the expected uptick in demand? EU nationals are thought to make up nearly 20% of Britain’s construction workforce, rising to 25% in London.
“Construction workers of all skill levels from labourers to site managers will be needed to deliver the government’s ambitious housing and infrastructure targets,” Brian Berry, Chief Executive of the Federation of Master Builders. “While there is much more to do to train up our domestic workforce, skill shortages and an ageing demographic will mean the construction sector will still need access to workers from outside the UK.”
Boris Johnson has advocated a points-based immigration system, which tends not to favour those who like getting their hands dirty. The Migration Advisory Committee has recommended that the salary threshold be £25,600, which is still above the qualifying salary of many professions relating to the built environment.
Furthermore, the proposed temporary visas currently offer no path to permanent settlement, meaning skilled workers may choose to take their talent elsewhere they can put down roots.
With 60% of construction products sourced from EU countries, there are already mutterings about how businesses will cope with burdensome administration, increased cost and lead times.
Barbara Kaucky, Erect Architecture, RIBA Small Practice Group Chair, said: “As a small practice we are concerned that Brexit might bring about a drop in standards, rises in construction costs and barriers to foreign talent staying in or moving to the UK.
“To protect our clients from a compromise in quality, and sustainability as well as price increases, we hope that any trade agreement includes an alignment of standards and frictionless movement of goods.”
However, the average buyer’s thoughts are far closer to home. Geoff Wilford, Founder at Wilfords, said, “We’ve had a busy start to the new decade in both sales, lettings and property management. The phones are ringing consistently again for the first time in a long time and the email enquires are flooding in apace. We are already seeing prices firm up, with a small number of sellers increasing their guide price to reflect the Boris Bounce.”
However, the swing in sentiment has been most obvious in Prime Central London, which is something of an island in the property market. Caroline Takla, Founder of prime central London buying consultancy The Collection LLP, said: “We have seen a marked increase in buyer enquiries since the beginning of the year particularly from overseas buyers despite the uptick in the value of the pound since the General Election result.
“Domestic buyers, however, particularly in “remain voting areas” will have a more pessimistic view and whilst life goes on, many will be keeping a close eye out on the macro-economic position as well as the micro.”
Tom Bill, Head of London Residential Research at Knight Frank, added: “In the 10 working days following the general election, Knight Frank carried out more exchanges in prime central London than any ten-day period since December 2016. Furthermore, the number of new prospective buyers registering with Knight Frank in London rose to its highest weekly total in more than 15 years in the second week of January.
“Activity levels in London are now at their strongest level since 2014, suggesting any impact from Brexit to date has been largely absorbed in the capital.
“However, this is unlikely to have any meaningful effect on prices in the near-term or the gradual recovery that has been taking place in sales numbers. Uncertainty over Brexit has not disappeared, questions remain over the trajectory of the global economy and there is the prospect of further property tax changes.”
Indeed, interest rates have held at 0.75% and the Bank of England has forecast growth for the UK economy to be at 1%, a far cry from the Chancellor’s estimate of 2.7%. The many conflicting forecasts are symptomatic of the many unanswered questions.
“By the end of the second quarter of 2020, we will have a clearer picture as to the shape of the future relationship we are likely to have with the EU, whether a softer Brexit or complete divergence, each of those scenarios will have opposing effects on the wider economy and therefore on the property market particularly in the sub £2,000,000 bracket,” said Takla.
“Only with the benefit of hindsight will we truly be able to tell as to whether we will be referring to this era as the Boris Bounce or the Brexit Blunder.”
History will decide the answer to that question. The property buying public certainly seem confident of a Boris Bounce; but then it was Winston Churchill who said that the best argument against democracy is a five-minutes conversation with the average voter…
