The impact of Brexit on Irish property?

The long awaited conclusion of the brexit didn’t take place as expected, and that’s an understatement.

At first, it was expected that a deal will be reached and agreed upon very shortly in between the UK and the EU, then the newspapers set the goal on approving the brexit agreement in parliament for March 1, just before the expected exit on April 1, and now it seems pretty clear that the chances of a no-deal brexit are significant. Will that have any impact on property in Ireland and the EU as a whole?

Property abroad was one of the most popular investments for Brits since forever. With extremely strong Sterling and low mortgage rates across Europe, this was a no-brainer for British investors who want to diversify their investments. Especially when London’s property prices grew out of proportion while European property prices, including Ireland, stagnated or dropped.

A lot has changed since the decision that was casted in the polls about leaving the EU, first and foremost the economic forecasts which have been rather gloomy, and reflected on the currency exchange rates.

The GBP to Euro rate is currently at around 1.125, and it used to be above 1.4 pre-brexit (and that’s only the interbank rate, in practise, the best exchange rate will be 1% worse). In addition, the prices of property in central London have dropped to their lowest levels in a long time due to brexit uncertainty.

Since  Brexit was decided, British investors are far less keen to put their money in Irish, or any European property, for that matter, because they have better alternatives locally. Surprisingly, Brits have not been slashing their expenses preparing for a rainy day, as expected, but their buying power overseas has been reduced significantly because of the unfavourable exchange rates.

What’s does the future lies for British investments in European property? In our opinion, it has to do with the exchange rates for the next 10 years. There is a psychological barrier beyond the practical reasons here – people still have a fresh memory of an ultra-strong pound and will have difficulty shelling out as much as 20% more for the same return (or possibly, as much as 40% once a no-deal brexit is announced).

This psychological impact fades over time, as the younger generations have enough disposable income to become a real market players, but as long as the exchange rate is bad for Brits, they will minimise their involvement in overseas property.

If the prophecies about doom and gloom economy will become reality, it may also be a situation where British people don’t earn enough to be buying (and property prices in the UK will collapse accordingly).

In all fairness, we think there is a better chance of Irish people buying property in London than the other way around unless miraculously a brexit agreement is reached.