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Brexit raised the risk of loss of jobs and houses in the UK and it forced many buyers out of property market during the changeover phase. The report on unresolved issues during the transition phase claims there are at least 1 million British expats waiting to know their status in the pre/ post-Brexit phase. This is one of the reasons for slowing UK / EU housing markets. The property markets across the continent are consolidating where many new construction projects and new schemes initiated to fulfil housing shortage led to excess supply of houses and resulted in consolidation of prices in some EU cities such as Switzerland, Sweden and Norway (as per the Scope study). The price of homes is stabilizing in most EU markets in the year after 2017 and growth is varied in different regions. The study claims, although, there has been excessive construction in some of the growing cities of Europe, there exists a shortage in residential sector leading to disproportionate construction of apartments.
The trends could be seen in global real estate, which led the local-governments have imposed strict regulations to confine escalation of housing prices.
Rather in some countries e.g. UK (London) and the US– affordability has been the main issue where the price of house is rising twice as wages. In US, it has been found that anyone working full-time cannot afford a two bedroom apartment with their minimum wages. At the same time, the low sale of houses has forced builders to cut the supply sharply, where many new housing projects have been stalled, even in regions where the market was strong during the 2008 financial crisis. The reports by UK builders claim only 12 per cent of the estimated or pre planned construction work has been initiated in the last three months in London to June (as per NHBC). Some of the largest housing projects that were initiated in the UK during 2010 to 2015 are facing a number of issues, including the Brexit confusion and reduced investment from foreign buyers due to increase in taxes by the government for projects over 1 million pounds.
The demand for homes continues to grow in UK as per NHBC. In the first half of the year, the prices dropped by 1.9 per cent and house builders estimate their profits may fall by 30 per cent due to increase in property taxes and reduced interest of the buyers during the Brexit phase.
There are a number of reasons for lowering growth in the UK. Brexit is one of the key issues. The low interest rates have led to increase in spending in 2017 and this may force the BoE to raise rates. Some investors believe the entire generation is paying more for housing and the conditions are not suitable to reducing prices. The role of housing ministers, related government regulations, taxation, stamp duties, low affordability, and disagreement over Brexit are other issues hindering progress in property market. Even in such conditions the housing market in the UK is picking up in the right manner in cities Birmingham and Manchester, and there are other regions showing exceptional growth.
To know more about Brexit and trade war impact on EU real estate, click Hamilton International Estates.
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