Brexit’s passage is partially blamed on the north-south divide where job creation and opportunity in general has been higher in the southern part of the country.
Those in the south were surprised with Brexit’s overwhelming support in the north, since they’ve seen the prosperity and high real estate prices in London and assumed that was true everywhere. Brexit’s effects are not evenly distributed across the country, either. Let’s look at the north-south divide that led to Brexit’s “surprise” passage and likely fallout.
A Look at the North-South Divide
Economic output in the wealthiest parts of London hit £135,000 per head, while the average economic value created per Londoner averages £43,000. Half of the country’s population lives in areas with an economic output per person less than £22,325. Parts of Wales have economic output a tenth that of London, giving England the greatest intra-country economic disparity of any nation in Europe.
Northern England has far more manufacturing jobs, whereas London is focused on international finance; this means northern regions are twice as dependent on EU trade as London for employment, while the high unemployment in these areas is due to a mix of government policies and globalisation of trade.
The Impact of Brexit on Real Estate
Buy to let residential real estate deals have declined as much due to changes in income tax and stamp duty tax law changes as decreasing demand from slowing immigration and tightening immigration standards. This was already decreasing residential rents in London by the end of 2016. Commercial property to rent inside the M25 has always been more expensive than that outside of it; often far more expensive, and thus the commercial property prices in London vary, but sites like The Workplace Company still allow deal seekers to find hidden gems in and around London.
We’re already seeing decreasing interest in the frenzied market that made London one of the most expensive property markets in the world. Interest in property across the country is also declining. The Royal Institute of Chartered Surveyors commercial property market survey found that inquiries fell across the northwest. Only 15% of chartered surveyors said they saw a rise in potential buyers compared to 40% in the first quarter of 2016.
The State of the Northwest Real Estate Market
The North West commercial real estate market has a healthy supply, especially for industrial property. North West real estate isn’t faced with the insane demand that drives up London residential and commercial real estate.
EU companies buying British goods may face price fluctuations and legal issues due to Brexit, but the likelihood that the pound would be devalued would only help the manufacturing sector that provides so many jobs in the northwest. That will keep commercial rents and property prices stable, even if the financial sector centre in London suffers.
Brexit may yet cause a serious decline in residential and commercial property prices and rents in London if it has a negative impact on the financial sector in London. It is unlikely to have the same impact on North West residential or commercial rents and prices because the industrial sector that provides so many jobs there is probably not going to be adversely affected by Brexit.