On 23rd June, the UK will go to the polls to decide whether or not to remain as part of the EU. At this time the end result would appear to be anybody’s guess. If there is a Brexit, what impact could it have on commercial property investment? Demand might be severely impacted Immigration is undoubtedly one of the hot topics in the Brexit debate. On the one hand there are a number of EU immigrants currently living in the UK, who could potentially (but not definitely) find themselves being required to leave if the UK chooses to exit the EU. On the other hand there are a number of UK nationals living in the EU, who could potentially (but not definitely) be obliged to return home if the UK chooses to exit the EU. From a property-investment perspective, the worst-case scenario would be the EU immigrants being forced to leave without the UK nationals being obliged to return. While this would seem unlikely on the face of it, it could not be completely ruled out since many of the UK nationals living abroad are retirees, who are not competing in the local job market. There could be a flood of property on the market If EU immigrants are obliged to leave the UK then those who are housed in rental property will need to terminate their rental contracts. EU immigrants who are owner-occupiers may choose to sell their property or they may choose to hold onto it and become landlords themselves. This, in and of itself, may not necessarily be bad news. A short-term glut of supply could become a buying opportunity, although it’s always worth remembering that there is a difference between low-priced and a bargain. Investors always need to be looking for quality property with the right features rather than just grabbing properties which are “priced to sell”. There could be a shock to lending Mortgage lending is at the core of the housing market and even those who have sufficient funds to operate purely out of their own funds can find themselves being affected by it. In simple terms, the more relaxed lenders feel, the more likely it is that there will be competition for the best properties since it will be easier for people to buy them with the help of mortgages. Conversely the more anxious lenders feel, the easier it is for cash buyers to build their own portfolios without competition from people who need mortgages. Also, when it is difficult to get a mortgage, people are more likely to rent, if only because they are unable to buy, which creates further demand for rental property. A Brexit could trigger a second independence referendum in Scotland During the independence referendum in 2014, much was made of the fact that an independent Scotland could not consider itself guaranteed membership of the EU. While it is unclear what impact (if any) this ultimately had on people’s voting choices, however many pro-independence commentators in Scotland have argued that it was such an important plank of the “No” campaign that a vote for Brexit should trigger a second referendum in Scotland, particularly if the majority of the people in Scotland vote to remain in the EU, but are, effectively, over-ruled since England has a much more substantial population. This could raise a whole new set of questions relating to a potential new relationship between Scotland and England, which, as a minimum, could create uncertainty in the property market, at least in the short term. As always, however, it’s important to remember that property investment is a long-term game and issues which create short-term volatility or other challenges are generally resolved over time.
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