It’s hard to believe that it has now been over three years since the Brexit referendum back in June 2016. As this seemingly never-ending Brexit saga continues, so too does the economic uncertainty.
So far, the ambiguity surrounding Brexit has taken its toll on the UK’s property market with stunted house price growth and a significant recent dip in the number of property sales.
The current date for the UK’s exit from the EU is set for October 31st and, while we’ve all learnt to take Brexit deadlines with a pinch of salt, it seems that we’re edging ever closer to a solution.
So, what will the UK’s property market look like post-Brexit? It’s not an easy question to answer but it’s one that current players in the property industry must consider today.
Before we examine industry speculation and property expert forecasts, let’s examine the data on the effects of Brexit uncertainty thus far.
So what does the current UK property market look like?
Since the referendum, Which? has reported that the average house price in the UK has increased from around £206k to £230k. However, the rate of house price growth has fallen fairly significantly in that time too, from 8% in June 2016 to 1% in June 2019.
According to Rightmove’s House Price Index, London and the South East have been particularly affected, with properties in London 2.1% cheaper in September 2019 than they were at the same time last year.
While some market experts claim this is predominantly down to Brexit uncertainty, many argue that the slowdown in property prices is symptomatic of a long-overdue correction in the UK’s property market.
When it comes to the supply of new properties, figures suggest that many people are holding off on putting their homes on the market. Rightmove’s data puts the number of properties coming to the market in September 2019 as 7.8% down when compared to last year.
Again, the slump is even more apparent in London, with over 20% fewer properties being listed across all sectors – first-time buyers, second-steppers and top of the ladder.
However, it’s not all doom and gloom, with Halifax reporting that the average price for a new home in the UK has risen by nearly £4k in the past year. They put this resilience down to strong employment levels and the lack of new properties to meet demand.
“Although the housing market will undoubtedly be influenced by events in the wider economy, it continues to show a degree of resilience for the time being,” commented Russell Galley, managing director at Halifax. “We should also not lose sight of the fact that the single biggest driver of both prices and activity over the longer-term remains the dearth of available properties to meet demand from buyers.”
Similarly, the Bank of England further evidenced this resilience with data for July showing a two-year peak in mortgage approvals. While the numbers aren’t extraordinary, they do demonstrate that, despite all of the political turmoil over Brexit, “mortgage market activity has remained stable.”
So what will the property market look like after Brexit?
Annoyingly, without knowing the conditions under which the UK will be leaving the EU, it’s very difficult to provide a convincing answer to this question.
At this moment in time, there is no UK-EU deal in place or even any prospective deal on the horizon. If there was, market analysts could scrutinise the arrangements, speculate on potential consequences and come to informed predictions for the post-Brexit future of the UK’s property market.
While we don’t currently have that luxury, we do know that the prospect of a no-deal Brexit is very much a possibility. On this scenario, business leaders and property experts have been more forthcoming with their forecasts.
What are the experts saying?
· The Office for Budget Responsibility has said that a no-deal Brexit could result in UK house prices falling by as much as 10% by the middle of 2021.
· KPMG has stated that house prices are likely to fall by approximately 6% in the event of a no-deal Brexit but could plummet by as much as 10-20% in a worst-case scenario.
· Looking at the wider economy, Bank of England governor Mark Carney has predicted that UK growth would be ‘guaranteed’ to fall if the UK were to crash out of the EU without a deal.
Market predictions are difficult but property market is resilient
Brexit is an unprecedented phenomenon, yet despite any concrete divorce deal for analysts to get their teeth into, it’s still far better to make predictions without certainty than to not make any predictions at all.
While the UK’s housing market has always been notoriously hard to predict, the general consensus is that a no-deal Brexit would almost certainly negatively impact the property industry.
Ultimately, it all depends on how consumer confidence is affected by the manner in which the UK leaves the EU i.e. with or without a deal. If confidence remains high, then house prices will remain relatively stable across the UK. If not, then we can expect to see property prices fall.
In this time of uncertainty, what can be counted on is that the UK will continue to be a highly desirable property destination. As well as the mitigation provided by the continuing low supply of properties and growing demand, investors both foreign and domestic will still find plenty of investment opportunities in the UK post-Brexit, especially within the capital.
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