Brexit worries Trumped: Currell’s Head of Research Nicola Almond discusses the possible effect Donald Trump’s election may have on the UK property market.
Worries over Brexit have been ‘Trumped’ and we are starting to consider the implications of the US election result for the UK property market. Emerging reports of increased web traffic for prime London property searches suggests that some North Americans are already seeking a more secure home for their capital, or perhaps themselves. Political and financial crises generally result in a flight to safe haven assets, such as gold and property, but in London this is likely to be limited to the prime market. This market had already seen increased interest from overseas due to the 18% post-Brexit decline of sterling, and any weakness in the dollar arising from the Trump victory is unlikely to make much of a dent in this currency depreciation.
For the moment financial markets remain relatively stable, meaning that US interest rate hike is back on the cards for December. UK rates are expected to remain at the current level for some time, as the Bank of England recently ditched plans for a post-Brexit cut due to better than expected economic conditions. Whilst higher inflation in 2017 could result in an increase in rates, the Bank has indicated that it will ‘look through’ short-term inflation, and try to avoid increasing rates.
Attention will soon be turning to the Autumn Statement (23 Nov), with the government under pressure to reverse the 3% stamp duty surcharge for additional properties (second homes and buy-to-lets). This policy is having a much greater impact on the property market than Brexit, and arguably is not achieving the desired objective of helping those at or trying to get onto the bottom of the property ladder. With the supply/demand imbalance in the rental market worsened by the exit of many small landlords, and consequent upward pressure on rents, the latter are now expected to grow at a faster rate than property prices over the next five years in London (c.25% vs c.20%).