UK real estate market after Brexit

The past 2020 was marked not only by the arrival of the coronavirus pandemic, but also by another event followed by almost the whole world. Brexit - Britain's exit from the European Union - took place on February 1, 2020. This was a consequence of the 2016 referendum, when almost 52% of voters supported the proposal that the country leave the EU, in which the state has been since 1973. Significantly, the coronavirus pandemic came along with Brexit, making it difficult to analyze which of the two events influenced a particular trend in the local real estate market.

Experts believe that despite (and even in spite of) Brexit, the UK property market is doing great. But a few years ago, the situation with Britain's exit from the European Union could be called ambiguous. The combination of uncertainty over Brexit and the subsequent stamp duty in the country has puzzled overseas and local buyers and left the residential market for a while.

In 2020, the coronavirus pandemic became another serious test for the real estate market. However, in the fourth quarter of 2020, the 2017 record was broken for the number of completed transactions in the premium real estate segment: despite the problems caused by the pandemic, it remains in high demand. The market began to gradually recover in the summer due to the formed deferred demand and tax holidays.

Of course, closed borders and inability to travel have stimulated demand for properties from predominantly local buyers. However, for example, Russian buyers of premium housing, even during the peak of the pandemic, were actively interested in real estate for their own residence and for investment purposes, and also often used online viewing. In general, there was an increase in interest in real estate in the fastest growing countries in terms of value, among which the UK showed the highest results - the average price here increased by 8.5%   one year to the fourth quarter of 2020 (followed by Germany (+ 8%), Portugal and France (+ 6%).

This result turned out to be predictable - earlier realtors said that prices for residential real estate in the country would increase by 7-10%. This rather large figure, which was achieved, is explained, first of all, by the colossal shortage of supply with high demand. The second important factor was government support in the context of economic instability: stamp duty holidays, special programs for the acquisition of first homes for young Englishmen, and so on. At the same time, mortgages have become extremely affordable - right now the Bank of England rate is 0.1%.

Experts predict that house prices in the UK will rise by 5% by the end of 2021, and even 24% if we consider the perspective of 2021-2025. Such positive forecasts are associated both with the indicators of economic growth in the country as a whole, and with the speed with which the UK is recovering from the consequences of the pandemic. It should also be noted that there is a significant deferred demand from foreign buyers, which continues to gain momentum lately.

Of course, in connection with Brexit, investment interest is also in some stagnation, since due to political events some investors are taking a wait and see attitude. However, demand for housing has remained stagnant and many clients are looking for properties for their own relocation, as well as for children who are still sent to study in the UK.

Again, if we talk about the most desirable locations for ultra-hinet living, London will inevitably be among the first. In 2020, the city took first place in the City Wealth Index Knight Frank, and, in terms of lifestyle, it is truly a unique city. Housing in the UK has been and will continue to be bought, so in the fourth quarter of 2020, the number of real estate transactions in the budget of 10m or more peaked since 2017.

What to invest in now in the UK

If we talk about the types of real estate that investors should pay attention to, there are now several of them. Firstly, these are student apartments that feel very confident during a pandemic due to a lot of competition in residences, where demand has always been higher than supply. If you look at large student campuses, then this is 5-6 people per apartment. Realtors say potential buyers are now often asking if demand has been affected by the fact that fewer students are now coming to the UK. In this matter, it is important to understand that not all classes have been transferred online, but only those that took place in classrooms with a large number of people. Small group sessions and meetings with professors are maintained, so a personal presence is necessary in many cases.

Secondly, these are campgrounds or so-called holiday homes. This segment has been developed in Great Britain since the 50s of the last century, when people began to actively invest in it, and now it has become very popular among the British as a place for family vacations. At the moment, there are large development companies that are either restoring existing holiday homes or building new ones. During the pandemic, the demand for such campgrounds increased, as many people began to work online and wanted to go outdoors to do it in the fresh air, in a comfortable infrastructure and at fairly affordable prices.

Thank you for your help in preparing the material:

Elena Marinichev, Vice - President of Russia Sotheby's International Realty

Marina Shalaeva, Director of Overseas Real Estate and Private Investments Department, Knight Frank