Impact of EU Expansion

According to The Association of Residential Lettings Agents (ARLA), the expansion of the EU will attract hundreds of thousands of immigrants to the UK and generate massive new demand for rental accommodation. Off Plan Investments recently held a stand Property Investor Show and met Nick Clark Managing director of Homebuyer Events and Property Investor Show, who said

With the UK already among the most popular choices for asylum seekers, the prospects of significant inflows of workers, both manual and professional is significant. We are talking about potentially hundreds of thousands of people, which is likely to create a marked increased demand for rentals. With limits to supply, this can only bid up rents, and send the property investment and the opportunities to join the buy-to-let sector into another boom phase.

John Wrigglesworth, Senior Economist for Hometrack, added in January 2004:

There is no doubt that the new members to the EU will open up the floodgates for migrant workers into the UK - I would expect well over 100,000 extra job seekers, nearly all of which will require rental accommodation. This could have a major impact on the property investment market, especially in Manchester, Liverpool and the South East where most new job opportunities exist. I would expect rental yields to rise this year as a result.

The influx of lower cost Eastern European labour should help keep a lid on inflationary wage demands at the lower end of the labour market, reduce inflation, help increase cost productivity and help GDP grow in the UK – there is already a shortage of construction workers and skilled tradesmen, and unemployment is already very low, so this influx should help growth and the economy generally. It will of course help the property investment / buy-to-let market since most of these workers will not be able to afford to own a property initially, or have the citizenship to raise finance from banks.

On the flipside, Peter Bolton King, Chief Executive of National Association for Estate Agents believes the EU expansion will pave the way for investment property and the general investor to make purchases further afield.

There is no doubt that the British continue to show considerable interest in owning property abroad mainly as second homes but also for retirement. Some 1.2 million own properties in Spain and France with considerable interest continuing to be shown in places such as Florida, Greece and Italy. We anticipate, as the EU enlarges, that over the next 10 years, we will also see an increase of second homes in Eastern Europe. Many areas offer superb value for money and this is bound to attract interest. It will however be important for people to look into this very carefully especially with the very different legal systems. Professional advice is essential.

The ten joining are Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Bulgaria and Romania are expected to join the EU in 2007.

So in summary, as from May 2004 there will likely be a moderate amount of migration of mainly skilled mobile workers from these countries to the UK in search for higher paid opportunities – probably about 150,000 people over the first year. Examples of the type of employee will be experienced builders, plumbers, financial services staff and medical professionals. Far from a perceived threat to the UK economy, these new workers are likely to make valuable economic contributions to the UK by filling skills shortages and helping efficient property development in the process. Such numbers are not unlikely to be noticed in places like London where the cosmopolitan internationally diverse mix of people is strong and has been for decades.

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