From the United States to Great Britain, there is a lot of anxiety about the future and that kind of instability can have a strong impact on housing prices around the globe. While the situation South of the border is still too fresh to fully assess the situation, there is much talk of what will happen to real estate in Britain following the country’s decision to leave the European Union.
One recent forecast found that housing prices in the UK will rise between 1 per cent and 4 per cent in 2017, a sharp drawback from 2016 gains. The same forecast also pointed to a possible drop of housing prices in London.
In times like this it’s not uncommon for homebuyers to look abroad for more stable options. Canada can often look like an attractive destination for people who want to park their money in a safe and secure economy. Brexit has created uncertainty in the UK, but whether it’s enough to draw people away from a city like London remains to be seen.
Simon Tollit doesn’t think it is.
Tollit, who is a Real Estate Professional in London, England with Sotheby’s International, says there’s more to the story.
It's creating uncertainty, but Brexit is not the reason why the UK and London is seeing a deteriorating property market. That's all down to down to Stamp Duty.
Stamp Duty Land Tax (SDLT) is a government tax home buyers must pay when buying a property. Tollit says if a person buys a property for 1.5 million pounds, they pay 12 per cent on the stamp value. So if the home sells for 10 million pounds–which isn’t unheard of in London–the buyer pays 12 per cent on the total between 1.5 million and 10 million pounds.
"So basically it's made it very, very expensive," said Tollit, who points out that in the last year the government also increased the Stamp tax on additional homes and investment properties a further 3 per cent. Tollit says that’s the main reason housing prices have fallen in London.
Sherille visited Sotheby's International Realty offices in London in December 2016. Simon Tollit is on the left.
Sherille Layton was born in the UK but immigrated to Canada with her husband in 1999.
We came here on holiday and just fell in love with Toronto. We applied back then and got our visa within 3 months. In fact, we got our visa I think seven days before 9/11. Now it's taking people three years, so we were very lucky.
The newer visa restrictions may also make it harder for anyone thinking of moving to Canada. But Layton says she attended an immigration summit in December and saw some signs that people were moving here.
I was sitting next to an immigration lawyer and [they said] a lot of people are going through Quebec to get their visas because it's faster. So I think there's definitely a lot of eyes on Canada.
London Is Still London
Tollit has a hard time believing Brexit would be the impetus for anyone moving abroad.
I can't think of one person who said 'right, on the back of Brexit I'm selling. It might be one of many reasons why someone would sell, but it's not a defining reason.
Especially when it comes to international buyers, the appeal of living in London outweighs the potential drawbacks of a post-Brexit world. Some are [concerned about Brexit], but if you're looking for a long-term investment or you're looking for a home, you're going to spend time in London.
He says anyone with business in the city or country isn’t likely to be scared away by the changing political tide.
Guys who've got 5,10 million pounds to spend generally are pretty intelligent, switched-on people by the virtue of the fact they can spend 5, 10 million pounds on a property. So they're not stupid and they're guided by experts. So as long as properties are priced correctly there is still a market.
Sherille agrees, saying the rising cost of living will definitely have an impact on the housing market, but people will always want to live there. Just like the rising cost of living in Toronto is not driving away population, but attracting it.
I think probably the first part of the year people will just try and buy because they don't know what the future is going to be like. Although, anybody that I know still in the UK were quite shocked about the whole Brexit thing.
And while London may be seeing a bit of a dip, people are still buying throughout the country. In fact, another recent study from Halifax points out that the number of first time buyers in the UK reached an all-time high in 2016.
Still Some Movement
That said, there does appear to be some movement. Whether that’s related to housing prices is hard to say, but Sherille says Toronto remains an attractive market for buyers.
If you look at the Toronto real estate market 2016 was another record year. The average price of a home was 730-thousand dollars. The market increased by 17 percent. And she expects 2017 to be quite similar.
There's a lot of turmoil in terms of the G8 countries. Who knows what's going to happen in the US. England's all over the place. France, Italy. We might look boring but we're pretty steady.
The Torontoism team recently joined the UK-Canada Chamber of Commerce, the 94-year-old non-governmental body that serves as an authority on trade and investment between the two countries. Sherille says they’re reporting a lot of movement between the UK and Canada.
There's been a lot of immigration lawyers becoming members of the Canada Chamber of Commerce, so that would also suggest there's going to be quite a bit of movement this way.
The Road Ahead For The UK
So while you may start hearing a few more English accents over the next few months and years, don’t expect bangers and mash to be added to the top of every menu in the city.
"London is still London," said Tollit.
It's still very much an economic powerhouse and we've still got the time zone, we've still got a good legal system, a fundamentally strong economy, the service sector's good, schools are good. So all of those factors are always going to play into people wanting to live there.
Tollit says Brexit does not signal a doom and gloom scenario for London. The market is simply pausing for breath. After all, the city’s real estate market has grown steadily for the last few years.
You can't have 10, 12 per cent growth year-on-year forever. It's just unsustainable. So it's a cycle we're going through. We've been here before and we'll come out the other side.