"How the Grexit could impact the UK property market"

Unless you've been in the depths of the Amazonian jungle for the past few weeks, you'll have been reading, or hearing lots, about the Grexit....

After Greece failed to make its all-important IMP payment this week, nerves are certainly frayed. And even though there are sporadic reports of a deal being done - and of Alexis Tsipras blinking in his standoff with the troika - make no mistake about it: this remains a highly volatile situation.

Anyway, I'm not here to talk about the intricacies of the Grexit, not least for the simple reason that it's incredibly complex and not exactly my area of expertise. But what I haven't seen, despite the masses of coverage, is a definitive theory on how the Grexit could impact the UK property market, if at all?

It's certainly a tough question to answer as there are countless variables at play. My suspicion, and I may be entirely wrong, is that the Grexit could benefit the UK property market. Why? Because in times of uncertainty, investors tend to veer towards bricks and mortar.

In contrast to equities, property is certainly looking attractive right now. Global stock markets are falling and there could be a fair amount of asset reallocation in the days and weeks ahead as investors run for cover. This flight to safety could be a positive for UK property values, as demand rises even further on the back of the post election high.

This whole argument, of course, could rapidly go up in smoke if the Grexit becomes contagious and slows the Eurozone economy as a whole, or somehow creates fear in the lending community. Most of Greece has been priced in by the markets, we hope, but there is always the potential for an element of surprise. Given that the Eurozone remains our biggest export market, if it sneezes then there is a good chance we will catch a cold too.

What we are less likely to see this time round is a surge in demand from overseas buyers — the Euro/Sterling exchange rate will see to that. A few years ago, foreign money was pouring into London's prime and super-prime property market, and sent prices sky high. But with the Euro on the ropes, making London property a lot more expensive for European buyers, that demand will be absent.

My suspicion is that domestic demand will make up for a decent amount of that shortfall as equity markets enter a period of high uncertainty.

By Jonathan Samuels of Dragonfly Property Finance

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