Trends in real estate markets in the UK and other European nations

Trends in real estate markets in the UK and other European nations

14 Sep 2018

UK real estate market

In the UK, there has been a lot of pessimism due to a rise in rates and Brexit uncertainty; still, there are regions where the property market continues to grow. Subdued growth is expected in some regions where the North is set to rise at the highest rate. Sluggish sales were reported in some of the markets in London but there has been solid demand in Southwest England and Northern Ireland, according to RICS analysts Simon Rubinsohn. RICS expects the rents to grow more than home prices. It forecasts the rise in rents at 3 percent per annum for the next five years, whereas, the prices will increase at the rate of 2 percent per annum.

Impact of new taxations and Brexit

Housing felt the pressure as the growth was 3 percent in May as compared to forecast 3.5 percent – which was lowest since August 2013 – as per ONS data. Brexit has been a key reason for local investors to stay away from the London property market. Investors are worried about the changes in the financial system, taxation and other regulation related to property transactions. Also, there are uncertainties regarding the impact on home prices in a post- Brexit phase.

In London, the first time home buyer grew in the last month. The increase in taxes on properties e.g. flat, made investors to pay additional tax duty in the year (as compared to pre- 2014). The government, recently, introduced tax relief for the first time buyers but the exemption is applicable for a home price greater than £300,000.

Some investors are benefiting from the market lows as rents are continuingly increasing, and this makes them earn through rents. The RICS report claims the rise in rents is expected to be up to 15 percent till 2023.

Currency worries

Speculative construction continues to dominate EU real estate markets, where, in Paris, London and Munich there are many high priced new constructions – targeting global investors. Foreign buyers are making luxury deals in London as sterling slumped, at the same time as forex traders were concerned over Brexit deal. The rates got 13 percent low since the referendum –that started on June 23, 2016, and the investors and traders believed the volatility will persist till the end of March 2019. The volatility can be in the range of 10 percent positive or 10 percent negative. The Bank of England claimed on BBC in August there is a great chance that no deal will be made.

Comparison with other EU markets

In Europe, other residential properties grew in the last few years and London properties peaked during this time. The prices in Switzerland, Germany, Norway, Austria grew in the range of 20 to 50 percent, while, some regions reported more than 50 percent growth. The reasons for volatile growth are - unpredictability in the financial market, population rise, inflation, low construction activities, wage growth, and economic growth.  Price correction was reported in some of these countries in the past few months due to the increase in the supply of apartments.

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