The uncertainty about the timing of the UK’s departure from the European Union and the terms of the agreement when that happens is creating jitters in all sectors, including the property market. More recently, the resignation of UK Prime Minister Theresa May on 7 June and the subsequent leadership contest within the Conservative party has added to the uncertainty.
A no-deal Brexit
In September 2018, Bank of England governor Mark Carney warned that leaving the EU without a deal could see house prices plummet by a third. This calculation was based on a financial stability model, with some arguing that assumptions made about Brexit are implausible. In February 2019 Carney added that UK growth would be ‘guaranteed’ to fall in the event of a no-deal Brexit. In contrast, the financial crisis of 2008 led to the average UK property value dropping by 17 per cent.
House prices since the Brexit vote
After the Brexit referendum in June 2016, house prices did not move for a while until May 2017 when the average house price rose to a peak in August 2018 of about GBP232,000. From this point, prices have dropped each month, falling to GBP226,798 in March 2019, the most recent month available.
The house price slowdown may be due to a market correction, that some say is long overdue. More recently, Scotland has become the first UK nation to see an actual year-on-year decline whereas Wales and Northern Ireland have healthy house price growth of around four and five per cent respectively.
Transaction volumes since the referendum
When there is uncertainty in the housing market, the number of homes sold is usually low. In June 2016, it appears that the referendum did not impact on transaction figures. However, the figures were skewed due to the introduction of a three per cent stamp duty surcharge for those buying second homes, with thousands buying before the change was applied earlier in the year.
According to the UK governments Revenue and Customs department, the most recent seasonally adjusted figures, have seen slightly more house sales in the last couple of months than there were in the same months of 2018, though this year’s figures are down on the equivalent months in 2017. In April 2017, there were 103,620 transactions, which dropped to 98,620 in April 2018 before rising slightly to 99,420 in April 2019.
Brexit market like for sellers
Uncertainty in the housing market can be measured by the time it takes for properties to sell.
In January 2019, the average time for a property to go under offer was 77 days, six days longer than the previous year and the highest number on record. The number has since fallen, but it is taking longer to sell this year than in previous years.
Brexit market for buyers
Housing experts believe there is some uncertainty about buying in the pre-Brexit era, with potential buyers choosing to renovate or extend their homes instead of relocating. Yet, properties will continue to be added to the market, due to death, debt and divorce. In addition, people still need to move for work or for schools, or they may be attracted by a discount.
Another incentive for people to buy is that mortgage rates are currently very low, and many want to fix a low rate as the UK continues to move through a period of uncertainty. However, potential buyers might struggle to get a new mortgage, owing to strict lending criteria, since there is a chance that interest rates will return to their pre-2008 levels of between six and seven per cent if a no-deal Brexit causes economic challenges.
Brexit house price predictions
It would appear that many people have been waiting until the details of the Brexit deal are announced before taking the plunge to buy a home. With delays in the Brexit negotiating process, some are choosing not to wait. The recent fall in prices may have encouraged some buyers, with the understanding that a house purchase is a long-term investment so that even if there is a short-term price drop after purchase, house prices are likely to stabilise in the future when it is time to sell.
Except House prices, Brexit affect and Food Prices too.
It is generally agreed by experts in the housing sector that it is still too early to predict what impact Brexit will have on property values. Experts predict that 2019 will see relatively little change in house prices as the market continues to tread water, though there will be regional differences and even different neighbourhoods in the same town since the prevalence of crime and the performance of a school can affect prices. A weakening appeal of UK investment could drive prices down, or a lack of certainty could drive up interest in the relative stability of bricks and mortar.
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