It’s been almost eight years since the Brexit vote, Brexit’s impact on property and its effects are still shaping the UK, especially its’ property market. In this blog post, we’ll explore the implications of Brexit on property transactions in 2024, including changes in regulations, market trends, and potential challenges for buyers and sellers.
Understanding Brexit’s impact on Property Market
A series of significant events have shaped the United Kingdom’s departure from the European Union. From the referendum in 2016 to the end of the transition period in 2020, here are some of the crucial moments in the Brexit process:
- 23 June 2016: The UK votes in a referendum to leave the European Union.
- 29 March 2017: The Prime Minister triggers Article 50, initiating the two-year countdown to Brexit.
- 14 March 2019: House of Commons votes to seek extension for Brexit deadline.
- 31 January 2020: The UK officially leaves the EU, entering a transition period.
- 31 December 2020: Transition period ends, UK exits EU single market and customs union.
Brexit’s impact on property in the UK property market experienced a diverse impact from these events. Primarily, Brexit’s effect on real estate has been commercial rather than legal, as property laws have remained mostly unchanged. Commercial aspects of the market were vulnerable to political shifts both domestically and internationally, leading to decreased confidence amid uncertainty.
Initially, the market faced a slowdown due to uncertainty surrounding Brexit. However, property prices demonstrated resilience, even amidst the economic challenges brought about by the pandemic, which economists initially feared could cause a 20% decline.
While logistical challenges arising from Brexit’s impact on property this did disrupt supply chains and labour markets, particularly impacting the housebuilding sector, these effects were often compounded by the pandemic.
Buyer sentiment varied, with some adopting caution while others took advantage of favourable conditions, such as lower interest rates and the stamp duty holiday.
Regulations and Legal Frameworks
Despite initial pessimism, market sentiment gradually stabilised and exhibited signs of growth post-Brexit referendum. The Brexit trade deal in December 2020 provided some clarity on the UK-EU relationship, reducing currency risks for international investors. This Trade and Cooperation Agreement (TCA) ensures tariff-free trade if rules of origin are met, with mechanisms for resolving disputes.
While property laws are primarily governed domestically, unaffected by EU intervention, associated legal risks could originate from EU-influenced areas, such as:
- planning
- public procurement
- employment
- environmental regulations.
Brexit’s impact on property, as the UK shapes its’ regulatory framework following Brexit, changes in laws and policies concerning property transactions and taxation continue to occur within the property market.
UK Budget 2024 – What It Means For Property Investing
Here are the key highlights from the Spring Budget unveiled on 6th March 2024. While certain measures may be viewed as a win for property investors and developers, others may pose challenges:
- Property Capital Gains Tax (CGT) Reduction: CGT has been lowered from 28% to 24%, providing a potential benefit for property investors.
- VAT Threshold Increase: The threshold for business registration for VAT has been raised from £85,000 to £90,000 annually, offering relief for small businesses and property developers.
- Abolishment of Multiple Dwelling Relief (MDR): MDR has been eliminated, impacting property investors seeking relief on multiple dwellings.
- Scrapping of Furnished Holiday Let Tax Relief: The removal of tax relief for furnished holiday lets may present a setback for investors in this sector.
Permitted Development Rights
What wasn’t included in the recent Budget announcement, but is incredibly positive for property investors, is the relaxation of rules concerning permitted development.
Previously, Brexit’s impact on property restrictions included a three-month vacancy requirement and a size limit of 1500 square metres, necessitating full planning permission. These obstacles have been removed, allowing for smoother conversion of commercial to residential buildings. This unannounced change offers substantial opportunities for investors and developers, marking a significant win for the sector.
Staying informed about legislative alterations is crucial for buyers, sellers, and investors alike. Seeking expert guidance and adjusting strategies in response to these changes is essential for navigating the evolving landscape of the property market.
Current Market Trends and Predictions
According to the latest Gov.UK House Price Index, average house prices saw an annual inflation of negative 0.6% in the 12 months to January 2024. This marks a contrast from the negative 2.2% recorded in the 12 months leading up to December 2023.
The provisional estimate for the average UK house price stood at £282,000, indicating a decrease of £2,000 compared to the preceding 12 months. Across different regions, average house prices experienced varied trends:
- In England, average house prices dropped to £299,000, reflecting a decrease of 1.5%.
- Similarly, in Wales, average house prices decreased to £213,000, showing a decline of 0.8%.
- Conversely, Scotland saw an increase in average house prices, rising to £190,000, marking a 4.8% increase.
- In Northern Ireland, the average house price rose to £178,000 in the year leading up to Q4 (October to December) 2023, demonstrating a 1.4% increase.
HMRC’s UK Property Transactions Statistics showed that the estimated number of transactions involving residential properties valued at £40,000 or more was 82,000 when adjusted for seasonal variations. This figure reflects a decrease of 12% compared to the same period in January 2023. But, between December 2023 and January 2024, there was a 2% increase in UK property transactions.
The UK Residential Market Survey for February 2024, conducted by the Royal Institution of Chartered Surveyors (RICS), revealed:
- A noticeable increase in buyer enquiries and new listings suggests a more optimistic trend emerging.
- Expectations indicate a modest rise in sales in the short term, with further momentum anticipated over the coming year.
- House prices continue to stabilise, and projections for the next twelve months indicate a potential return to growth.
Opportunities for Buyers and Sellers
Brexit’s impact on property for buyers, sellers, and investors need to remain flexible in their strategies to navigate changing market conditions and capitalise on emerging opportunities. Effective risk management strategies are essential to protect investments and mitigate losses.
Despite challenges, the UK property market offers lucrative investment opportunities, especially in cities considered property hotspots, such as:
- Leeds
- Liverpool
- Manchester
Adopting a long-term approach will enable investors to capitalise on the evolving UK-EU relationship and market trends, ensuring sustainable returns. Given its less liquid nature, doing this will allow you to maximise benefits from the real estate market.
As the UK housing market rebounds and demand for housing increases, there’s an expected uptick in real estate investment activity, presenting opportunities for buyers, sellers, and investors. Debt-based investments offer steady, non-correlated returns amid uncertain house price growth, providing a buffer against market downturns and asset depreciation.
Conclusion
In summary, while Brexit introduces challenges and uncertainties, the UK real estate market remains resilient, offering opportunities for those willing to adopt a flexible, long-term approach to investment and adaptation.
Seeking professional legal guidance is essential for navigating the real estate market and property transactions. At Martin Shepherd Solicitors, our property experts can assist you in all areas of conveyancing including:
- buy to let
- leasehold & freehold
- shared equity
- new build
- right to buy
Don’t hesitate to contact us. We look forward to hearing from you.
