Of course the hot topic for us presently Is Brexit. How is it going to effect the UK economy in the short and medium term and what does it mean for construction projects? Clearly it’s not going to have a positive effect… the question is whether it’s going to be a bump in the road, or a roadblock.
London has faced worse and come through.
Around London there are many areas that have weathered the storm of financial crisis including the 2007 Global financial crisis with nary a blip on their regional house price index. Typically, the regions of London that see large spikes in eal estate prices up and down tend to be those influenced by confidence in the economy effecting demand for premium rental (business and residential) such as the London City. As demand heats up, such areas skyrocket in price, when things go pear shaped….they tend to be the first to see a downturn.
Many of the mainly residential areas of London sail through such events almost unscathed. People still want homes, people still want to improve their homes and demand in these areas generally stays strong as people looking to downsize their center of London mortgages to a more affordable outer London alternative compete with those already looking to buy in these areas.
What can we expect from Brexit?
We are expecting some short term pain as people delay their construction decision till they see how things are going to play out…then a soft landing followed by a period of sustainable housing price growth. This is not another GFC. Look at Australia. They have some of the world’s strictest immigration laws yet they have the world’s strongest real estate market. Likewise, Switzerland has a strong real estate market if you are looking for a more local comparison. We may see the UK bring in work visas similar to the Australian work visa system which is also a pathway to immigration – you just have to prove you bring worth to the country first.
It all comes down to certainty and demand. Investors want certainty as to the direction for the UK and with that certainty will come confidence and demand.
In the short term if you are considering a refurbishment, redevelopment, or any kind of residential development of improvement in London we recommend considering the following
- If you are building for your own amenity – nothing has changed.
If you need an extra level added to your house to home your growing brood, a larger entertainment area, if your house needs a serious remodelling because the kitchen is too small, not open to the living area… then Brexit doesn’t change anything for you.
- Shop around – there are bargains to be had
In times like this, it’s reasonable to expect a lower price from almost everyone involved in the construction industry. With some of the larger, speculative construction projects around London on hold, there is greater supply in the industry which has to force price down.Look for that fixer upper you’ve dreamed of buying and renovating and offer a price that takes into consideration the current market conditions, not just the last 3 months of residential London house price data.
- If you are renovating for capital gain – check the area.
Some areas of London have seen steady growth throughout the last 25 years, as opposed to central London which has seen meteoric growth in times of plenty, with some fairly large contractions in times of lean.If you are looking at developing in an area where the capital gains from improving a property might well be swallowed up by a contraction in land values… then perhaps best to think carefully before proceeding.If you are developing in areas where high demand keeps property prices buoyant even in times of economic uncertainty…. Likely you are still right to go ahead.
- The experts are tipping a soft landing not a crash.
The Bank of England has dropped interest rates by .25%… hardly the stuff of panic. The property market is tipped to contract slightly in 2017, but move ahead more strongly in 2018 with 15% price growth across the UK expected over the next 5 years (and its historically usually higher in London). The reality is Brexit or not, supply of real estate in London is almost going to outstrip demand.
- The Construction industry in the future will likely experience labor Shortages
It’s no secret that your average building site has many workers from Europeans countries that will work longer and harder for less as London wages are so much better than almost anywhere in Europe. If those workers can no longer easily work in the UK and return home… the resulting workforce shortage will push the cost of construction up in coming years.
- Call Kroos Architects
We are specialists in start to end renovation and construction projects in and around London. We’ve weathered the ups and downs of the London property and development market through good judgement and common sense. We know the market and we listen to our clients.
Talk to us about your London building or renovation goals – we are sure to be able to provide the advice you need on how to achieve them in this post Brexit environment.
There may be less seats at the table for architects in London, but Kroos will remain one of the firms here for you today, and into the future
Photo courtesy of Caterwings Uk – London Catering Specialists