To judge by tabloid headlines, there are no two subjects more certain to stir the blood of an Englishman than bossiness from Brussels and the prospect of a house-price crash. But in freeing ourselves from the former, could we be condemning ourselves to the latter?
Over the past few months there has been a steady trickle of predictions from the property industry that Brexit would damage business. In December, Berkeley Homes complained that Brexit would mean London having less influence, fewer jobs and lower growth, and therefore needing fewer new homes built. That came on the heels of a KPMG survey claiming that 66 per cent of property industry people thought Brexit would have a negative effect on inward foreign investment in London property.
Not everyone, of course, sees that as bad thing. For every Londoner who has made a killing on the value of his home as London property has become a global commodity, there’s another who deplores being priced out of the market. But before the ‘in’ campaign starts to frighten homeowners with prophecies of negative equity, and the ‘out’ campaign tries to lure the priced-out with the prospect of a new era of cheap housing, we should ask whether the fears of estate agents and developers are built on false premises.
It’s true that prime London property has long been held aloft by international investors. According to a Knight Frank study in 2013, 49 per cent of all prime central London buyers were non-British citizens, while 28 per cent did not even live in the UK: their purchases were for occasional use or investment. But it’s unclear what role, if any, the EU has played in attracting this money to London: only 16.5 per cent of buyers were from other EU countries.
Certainly, some owners would sell up and leave in the event of Brexit. EU institutions such as the European Bank for Reconstruction and Development would relocate, taking key staff with them. Some argue that other banks will relocate their European HQs — but the same was said when we stayed out of the euro, and it didn’t happen.
What about EU workers beyond the City? There are 400,000 French people living and working in Britain, according to the French Consulate. With Brexit, they could lose the automatic right to work and live here. But that assumes a post-Brexit UK government would want to cleanse the country of EU citizens. Why, if they are contributing to the economy? It’s far more likely that EU nationals earning over a certain amount will find it no harder to live here than at present; only the low-paid or unemployed would find it so — and they’re not likely to be buying London property anyway.
As for non-EU nationals, most important to the London prime market at present are those from Russia (9 per cent) and the Middle East (7.5 per cent). If you’re an oligarch looking for a bolthole or a sheikh looking for a summer palace — and possibly a place of sumptuous exile — why should Brexit make a difference? What attracts these international buyers to London are political and economic stability, an honest legal system, favourable rules for non-doms and a vibrant cultural life. None of that is threatened by Brexit.
London’s property market isn’t just about the super-wealthy. A lot of drab little flats are bought by overseas investors attracted by London’s history of rising property prices. Some also buy with a view to sending their children to school or university here. Again, why should Brexit affect them?
So the direct effects of Brexit on London property are unlikely to be great. More important is the extent to which a post-Brexit government would exercise its new-found freedom from EU rules on property ownership. As Hungary has found with its Land Act — designed to protect small farms from being bought and amalgamated by foreign investors — the EU regards any interference with cross-border investment in property as contrary to single-market rules. It has launched an action against the Hungarian law.
Any attempt by Westminster to restrict the rights of EU nationals to purchase property in Britain for residence or investment would meet the same resistance. But after Brexit there would be pressure to introduce laws to limit foreign purchase of London property. George Osborne has already tried to appease that urge by changing stamp duty in favour of owner-occupiers. Might he also make would-be foreign buyers commit to spending so many nights in Britain before they could buy a house — as happens in Switzerland?
Brexit is championed by those who see it as a route to freedom from heavy–handed regulation. The irony is that, in the case of the housing market, Brexit would be very likely to lead to increased regulation. Brexit fans might feel a little cheated, but if they own a London property, they probably won’t feel poorer.