Brexit challenges for agents and the property industry
Suddenly Brexit Day is nearly here.
It may have taken three and a half years from the Referendum but the UK will, within days, be outside of the EU. Whatever one’s views, and whether or not that is a cause for celebration, there is substantial work to be done by the end of 2020 – the transition period.
The object is to achieve clarity over this country’s future, and that applies to our industry as much as any other. It will take years, possibly decades, for a stable post-Brexit landscape to emerge as this country disentangles itself from the EU.
The mistake is to assume that on February 1 we’ll wake up and “it’s happened” – in fact, the hard work may only just have started.
– Will today’s Boris Bounce turn into this summer’s Johnson Jitters?
Only those with a vested interest in talking the market down deny that there’s been a renewed confidence in the mainstream and prime buying and selling since the General Election.
There have been more sales completed (up 6.2% in December says HMRC, despite Christmas), higher asking prices (up 2.3% with the biggest New Year leap in 18 years according to Rightmove), and more optimism (a doubling in the number of agents expecting an improved market, says RICS).
But the question is, will this last? If, by the summer, there is no sign of a successful trade deal with the EU (or maybe even the US) the debate from September onwards will be defined by the question: Is the UK heading for No Deal at the end of the 2020 transition period.
If so, will the housing market return to something like the hesitant state it had before last month’s General Election?
– Will agency-focused legislation begin to diverge from the EU?
The introduction of the Fifth EU Anti-Money Laundering Directive into the UK just a matter of days ago shows how closely harmonised some agency-related legislation is with the European Union.
But there are more such links, much more commonplace than those surrounding money laundering issues. These are long-term issues agents have to think about.
For example, the Energy Performance Certificate (introduced in the UK in 2007) was a product of the EU Directive 2002/91/EC.
Now one might guess, especially in our current climate crisis political landscape, that EPCs will remain in place in the UK – but outside of the EU, the UK is now free to change them if it wishes. Will there be pressure to do so?
In construction, the British Board of Agrément – it even uses the French term for ‘approval’ in its name – is a certification body for some standards (FENSA for doors and windows, for example), many of which are based on EU legislation. Again, the UK may continue to harmonise with EU standards but it’s likely there will be pressure from some quarters to diverge.
There could be long-term, ongoing change affecting agents as a result.
– Will City of London job losses hit the capital’s high-end housing market?
So far the financial services fall-out from Brexit has been less-than-expected, but many players have made it clear they have been waiting to see if the UK would actually go, and if so under what terms.
Bloomberg has predicted that potential staff relocations from London include 4,000 staff from J P Morgan, 150 from Barclays, 1,000 from Morgan Stanley, 1,000 from Goldman Sachs, 1,500 from UBS and 1,000 from HSBC. This adds up to a potential 8,650 jobs leaving, out of a total of 48,000 London-based posts currently accounted for by these companies.
What of the City’s sales and rentals markets if London is somehow under threat as a premier financial hub?
– Will overseas buyers continue to want to buy in the UK?
There are two aspects here. Firstly, irrespective of Brexit, there’s the anticipated three per cent SDLT surcharge proposed by the government and likely to be confirmed in the March Budget. This will apply to overseas investment buyers living outside the UK.
The second aspect is Sterling: it went into freefall after the referendum (have you seen the cost of those holiday Euros?) and within a year of the Leave vote, those buying in the UK and using other currencies were receiving what were effectively discounts of up to 21 per cent.
If Sterling returns to something like its pre-referendum level soon, will those buyers go? And if so, will domestic buyers step in to bolster the prime London housing markets so heavily reliant on overseas interest?
– Will there be a labour force to meet UK’s new homes aspirations?
Leave to one side the abject failure of successive governments to meet housing targets in the past, and even without that this area looks like one of the biggest problems for the UK post-Brexit.
That’s because the 2017 Labour Force Survey (the most recent figures available) show non-UK workers were 14.5 per cent of the UK construction workforce, many from the EU.
The Construction Industry Training Board has led a number of schemes since 2017, aimed at fostering more home-grown construction workers.
Most notable has been the Construction Skills Fund – led by the CITB on behalf of the Department for Education – which aims to have trained 13,000 construction workers by the end of this year.
Will this and other projects provide enough labour, especially when hugely labour-intensive and heavily-delayed projects like HS2 and Crossrail drain resources at the same time as ambitious housebuilding targets are to be met?
Boris Johnson may dismiss such concerns as examples of doomsters and gloomsters – but that doesn’t mean these challenges will not exist. Whether Britain meets these challenges is largely up to the politicians – but our industry will have to be prepared to monitor and match the changes as they emerge in the years and decades to come.