The global impact of the Coronavirus pandemic has understandably overshadowed Britain’s exit from the EU. The long awaited ’Brexit Day’ occurred on the 31st of January this year with the newly negotiated positions on trade, travel, regulation and immigration set to come into effect as of January 1st 2021. There is still much uncertainty surrounding the topic as citizens and businesses prepare for the changes and opportunities that lie ahead.
How will Brexit and the many changes associated with it, impact upon Birmingham property prices?
The Covid-19 pandemic has demonstrated what happens to the property market in periods of uncertainty. To generalise, buyers postpone their purchasing decisions to await clarity, or they adopt an opportunistic approach to making offers. High end properties are typically more significantly impacted, as the price elasticity of luxury goods is higher. For mid-market properties demand is inelastic as citizens will continue to need homes in prime locations, such as Birmingham city centre. The short-term reduction in buying activity increases demand for rental accommodation, as households seek flexibility whilst awaiting more stability from the property market and broader economic clarity. If we assume that the effects of Brexit could potentially mirror those of Covid-19, Brexit could result in a vast increase in rental demand in the city which would benefit Birmingham property investors.
In order to boost the economy, the government has been setting out a path of fiscal stimulus, namely largescale infrastructure and regeneration projects. Having reached the limits of monetary policy stimulus (low interest rates and quantitative easing), turning on the spending taps is the only means of kick starting the economy.
Birmingham is set to benefit from such expenditure; not only via the positive impact of High Speed 2, but also through the material improvement of the city centre and the ambitious expansion of several projects such as the Smithfield development. Birmingham property prices may rise to reflect the tangible improvements of the city centre.
Potential sellers will echo the approach of buyers in delaying their moving decisions. Therefore, the number of properties coming to market will fall without prices necessarily being lowered. In terms of property supply, construction costs have been steadily increasing in the past
year and Brexit may accelerate this if access to international labour sources is diminished. Such an increase in construction costs would be passed on in the form of higher property prices, therefore Birmingham’s new build prices may be ’price pushed’ which will benefit those currently holding assets in the city.
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