If I can be forgiven for opening with a quote of non British origin, we have nothing to fear but fear itself. Wise words, because it turns out fear itself is really, really frightening and the damage it can do is very real. Fear sparked by Britain’s vote to leave the EU prompted investors to hit the panic button, sending the FTSE 100 Index falling by more than eight per cent in the opening minutes of trade. Banks were hit particularly hard, with Barclays and RBS tumbling by around 30 per cent. The sterling succumbed to gloomy predictions and plunged by more than 10 per cent, to a low not seen since that dark day in 1985.
But what of the housebuilding industry? With at least 10 per cent of its labour force coming from Europe, banks already shy on lending to property developers and potentially less people coming to Britain to build homes for, what are the industry’s initial reactions upon waking in this strange new world?
“Being honest I would have preferred to stay within the EU as it is good for trade across member states and it would have avoided this period of uncertainty we’re heading in to,” said Chris Nelson, founding partner of egg Homes. “There will, without doubt, be an immediate financial impact, across all sectors of the construction industry. Perhaps long-term, once new trade deals and agreements are put in place with individual European countries…things should go back to normal and we could even be in a stronger position, but the immediate impact is a big gamble in my opinion.”
Unfortunately, it could take years for Britain to negotiate new trade deals, leaving many industry players on an unclear path. “As an employer, we are concerned for the welfare and peace of mind of our 150 plus employees comprising 17 nationalities, including eight different European countries,” said Anil Varma, managing director, HarrisonVarma. “It is extremely unhelpful that there has been no clarity or planning for the future. I would urge an early announcement to allow our staff, many of whom have established themselves in London making a home for their families, to plan ahead for their future.
“We are now heading for a long period of huge uncertainty. We do not know how this will affect our buyers – both UK & overseas, or our European employees. We need early decision allowing us to plan our business. When we started our latest development project – Buxmead in The Bishops Avenue, Stamp Duty was four per cent and it has now increased to 12 per cent plus an additional three per cent for second home owners. This coupled with the changing rules for non-doms and now Brexit means we can never plan ahead as this is a time of major change and will have a long lasting impact on the British economy.”
However, many are optimistic on the opportunities that Brexit will bring. “The UK’s decision to leave the EU is an historic event and we should embrace this whole heartedly,” said Robin Paterson, joint chairman & CEO of United Kingdom Sotheby’s International Realty. “This opens new opportunities for investment, we may have fewer European investors in the coming months but we believe there will be significant inward investment from Asia, as well as from the US. Buyers from these regions will undoubtedly be looking to snap up bricks and mortar in the UK with the predicted fall in sterling.”
John Elliott, managing director of Millwood Designer Homes, said, “I am excited to get on with the New World and see the back of EU laws which have been detrimental to us for over 40 years. One of the UK’s biggest assets is our home grown housing market and this will now be much better off out of EU regulation. For many years, the EU Habitats Directive has had an unnecessary impact on housebuilding. The mere hint of great crested newts or slow worms on a site [which are rare in Nothern Europe but prolific in Southeast England] can delay building for months as they have to be ‘translocated’ and caught and taken somewhere else for release.
“’Special Protection Areas’ were another misguided EU directive, which in the case of Ashdown Forest in East Sussex, has resulted in a 7km zone where building can only take place if would-be builders provide SANGS (Suitable Alternative Natural Green Spaces). However, according to conservationists, this is detrimental to the Forest as it will destroy the flora and fauna.”
Whatever the pros and cons of Brexit might be, the decision has been made and the show (house) must go on. According to the British Property Foundation, the government needs to maintain its focus on existing national priorities such as housing, and make decisions on major infrastructure projects, such as airport capacity and maintaining momentum around HS2, swiftly.
“It is now clear that there will be political changes ahead, but we will continue to work in partnership with government and other stakeholders so that the real estate industry, which is a considerable contributor to UK GDP, can continue to support the economy and create great places,” said Melanie Leech, chief executive of the British Property Federation. “The negotiation process is going to be long and complicated, and there will be many unknowns ahead. Our priority is that the government maintains focus on existing national priorities such as housing.”
Once Article 50 is triggered – which may not happen for some weeks or months – a two-year countdown begins for the UK to negotiate trade deals with the remaining 27 EU countries. It may be many years before any clarity on the future of the UK is offered. The only certainty in the meantime is that people will still need homes; no one can afford to down tools.
“It is too early to understand all the implications of the Brexit vote for house builders,” said Peter Andrew, deputy chairman of the Home Builders Federation said. “However, it is clear that after decades of under-supply we face an acute housing crisis and demand for new homes will remain high. We will continue working with government and others to ensure we can deliver the number of homes the country needs in the coming years.”