How has the country-house market changed since we last faced a referendum on our position in Europe? Roderick Easdale asks if we can learn anything from 1975

by Roderick Easdale

One of the contentions of a Remain campaign that has been dubbed Project Fear has been the claim that house prices will fall dramatically if Britain leaves the EU. This is bananas—curved or otherwise— say the ‘Brexiteers’. So what is the reality for the country-house market and can the previous European referendum tell us anything?

‘Just before the European referendum of 1975,’ says Dan Gandesha of Property Partner, ‘quarterly price growth had slowed to 7%, a year after hitting 18.2%, and 2.5 years after recording the highest-ever quarterly average house price rise of 42%. Average quarterly price growth didn’t fall as low as 7% again until the fourth quarter of 1980, more than five years on from the referendum.’

However, Andrew Giller of house sees problems in making historical comparisons as ‘the country-house market has changed greatly since 1975 and is now part of a global community. Although the EU is important, we also now work with people in the Middle East, Far East, China and America’. These international buyers have tended to focus on the London market and this, in part, explains why the UK housing market has seen an almost 18-fold increase (1,751%) in prices since the last referendum, but, in London, average prices have soared 3,200%.

How much British membership of the EU has had to do with these figures is probably somewhere between ‘absolutely nothing’ and ‘almost nothing’. However, one area in which membership of the EU has a direct relationship with property prices is in the farmland sector, as the EEC as it then was, and then the EC and EU, has always been heavily involved in subsidies to farmers. ‘Farmland prices spiked in 1973, when the UK joined the EEC, probably due to land prices “capturing” an element of the support that farmers received through the price-support system,’ explains Jason Beedell of Strutt & Parker.

‘This has happened again with subsequent changes in farm support, most notably following the MacSharry reforms in 1992, when the payments that farmers received were capitalised in land prices.’ The residential-property market tends to slow at times of political uncertainty, but, whereas most agents say they perceive a current slowdown, others report it is pretty much ‘business as normal’. Mr Giller sees a country-house market that is ‘busy, particularly in the £700,000 to £2 million-plus market’.‘Prime country-house annual price growth was 2.4% over the year to March 2016, down from a high of 5.2% in 2014,’ says Knight Frank’s Oliver Knight, ‘but how much of this is due to a potential exit from the EU is hard to gauge.’

If we vote to remain in the EU, then agents expect a rapid acceleration in sales after the vote and a potentially buoyant country-house market. This would be similar to the upsurge after the last election, when fears about a ‘mansion tax’ dampened the market in the run-up to the vote. The short-term consequences of a no vote are less clear. ‘A vote to leave is likely to usher in a longer period of uncertainty. However, any significant drop in the value of the pound caused by this could provide a short-term boost to international demand in the prime country market,’ believes Mr Knight.

In the medium term, the implications of the referendum are ‘relatively unimportant for real estate,’ says Savills’ Lucian Cook. ‘The attraction of this class of asset has more to do with the asset itself than whether it sits within the EU or not. The UK property market depends mainly on domestic factors and the drivers of death, debt and divorce and the needs of upsizers and downsizers will continue to determine it.’

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