Britain’s controversial decision in 2016 to leave its biggest trading partner, the European Union, prompted a wave of political headaches and several high-profile resignations in Britain’s parliament. But the infamous separation of powers seems to be a blessing in disguise for the UK property market as a recession looms.
After the Brexit vote, some foreign investors increased their investments in other parts of Europe. With the help of low-cost debt, this has helped fuel a storm of demand for buildings in places like Paris, Berlin and Milan that has driven prices to unprecedented levels. As interest rates and government bond yields continue to rise, these high prices and meager yields look less attractive, making parts of Europe more vulnerable to a housing downturn.
But properties in the UK are trading at a discount to comparable properties in Europe thanks to a buffer created by the Brexit vote. Additionally, UK property yields are less sensitive to interest rate increases. With all of this, the UK is set to be the best performing property market in Europe over the next five years.