One of the conundrums of EU membership for the UK has been the mass influx of people from the continent since 1993, but especially from 1998-onward. Some 8-million immigrants now call the UK home — of which 3.3-million are EU citizens who’ve come to the UK to work or study.
When you suddenly dump 8-million people (or even 3.3-million Europeans) into a country it puts an unprecedented strain on the country’s housing market. Indeed, since 1993 property prices in the UK have become some of the highest priced property on the planet sometimes pushing UK homebuyers aside and into high-priced rental accommodations.
Although these mass migrations began in 1993 when the UK joined the EU (bereft of any referendum) the population of the UK had been holding near 57.7-million with almost no annual growth in the UK population. In recent weeks the population of the UK has surpassed 66-million. It’s easy to see from this calculation that the UK-born population only increased by 1-million from 1993-2018, while the balance of the country’s population increase (8-million) occurred as a result of immigration.
Therefore, is it any wonder that house prices are expected to fall once Brexit occurs and the UK government is again in charge of how many immigrants it lets into the country? Certainly the demand for housing and services will fall to equilibrium levels as supply once again approximates demand.
Is it Possible to Determine Housing Policy Before Immigration Policy is Decided?
In a word, no.
As long as unrestricted immigration continues, any housing policy is doomed to fail no matter how well-intentioned. When numbers of immigrants rise or fall by the hundreds of thousands per year, trying to fine-tune the UK’s housing policy is impossible.
The same holds true during the 2-year Brexit implementation period. Immigrants living in the UK may decide to return to their countries of origin at a rate the UK government won’t know about until well after it has occurred.
Assuming the government places a cap on immigration (of say, 200,000 per year) during the 2-year implementation period it still leaves the variable of how many immigrants will leave the UK, post-Brexit.
As you’ve correctly deduced from reading the above, TWO VARIABLES have been at play in the UK’s housing/immigration market since 1993. No wonder there’s been chaos!
Post-Brexit, there will only be one variable — and that one variable could still become a large factor in this equation — which is why immigration levels should continue to remain high to level-out the expected crash in housing demand that will negatively impact house prices and rental rates.
In short, the UK government’s approach must be one of helping to stabilize the UK housing market by maintaining high-ish immigration levels for up to 5-years following Brexit, otherwise demand will crash and property values will fall precipitously and trigger a mini-recession in the UK.
What is the Best Rate to Taper UK Immigration?
Last year, the UK allowed over 300,000 immigrants into the UK (great for UK businesses that depend on cheap labour) but it puts severe demand on housing, leading to vastly overinflated house prices.
Were the UK to drop immigration down to zero in 2019 and 2020, not only would demand for new housing crash, it could happen that large numbers of immigrants may leave the UK. How many? No one could say. It could be thousands, it could be hundreds of thousands, it could be millions.
How can you create a housing policy when your assumptions may be off by millions of people? You can’t.
Therefore, whatever changes there are to be in UK housing policy for the next 5-years, it will be best that the government make only incremental adjustments to immigration numbers, net immigration numbers, and in housing policy — that strongly adhere to whatever housing market situation develops, as it develops.
Allowing housing prices to drop precipitously (even while recognizing those prices are at present vastly overvalued and must eventually return to reasonable levels) could wreak havoc with the UK housing market, with people’s lives, and with the UK economy. It’s the only time where policy must follow an evolving situation instead of leading it.
This scenario will allow immigration levels to be tailored toward a gentle and ongoing reduction in the outrageous housing prices in the UK’s major cities to something approximating a normal housing market.