How will Brexit affect house prices?

 

 

If you own a home, or simply live on this island, you may have been watching Brexit developments with consternation, worried about the impact it will have on your mortgage and your property’s value and all the equity you have built up in it (as well as on the availability of food and medicine, ease of travel, the future of your job, the fortunes of your small business—little is safe from Brexit.) Alternatively, if you’re looking to purchase a property, you might be hesitant to lay out so much money in an unstable housing market and wider economy. You might also be salivating for a crash that will suddenly make a 4-bedroom detached property in an area with great schools available to you.

And you wouldn’t be alone in balking at buying, or selling: residential property transactions have reached their lowest levels in years. Land Registry data found that sales volume fell year-on-year in two-thirds of all local authorities in the first eight months of 2018. And predications are that sales will lag through much of 2019: according to the Royal Institute of Charter Surveyors (Rics), more than a quarter (28%) of surveyors expect the number of home sales to fall in the first three months of the year—the worst prognosis in more than 20 years of polling surveyors. Already, transactions slumped by 16% across 2018 in super prime areas of London.

Buyers, and sellers, are clearly unsure what’s going to happen to the market and both are waiting to see how it shakes out, withholding properties from the market. And indeed, at the end of January 2019, it’s impossible to confidently predict how Brexit will impact house prices. We still don’t know what type of Brexit deal we’ll get, if any, and how the economy weather it. There are simply too many unknowns.

But we can tell you what’s already happened to house prices in the run up to the 29 March deadline and as Theresa May’s negotiations with Brussels—and Parliament—have stalled, and tell you what the experts are predicting.

How Brexit has already impacted house prices

• House prices plateaued in the immediate aftermath of the EU referendum in 2016, but recovered to post modest growth throughout 2017.
• While average house prices across the country haven’t yet fallen, they grew at the slowest rate since 2012 in November 2018: a year-on-year growth of just 0.3%.
• The overheated London property market may be the canary in the coal mine for house prices after Brexit across the UK: in January 2019, they fell for the fifth consecutive month, wiping off an average of £15,600 from the value of homes since the market peak in July 2017.

What the experts say

• In September, Governor of the Bank of England, Mark Carney warned that a no-deal Brexit could wipe as much as 35% off house prices over three years. He also warned that mortgage rates could spiral. However, that has largely been regarded as a worst case scenario.
• Many surveyors polled by the Royal Institute of Chartered Surveyors (Rics) expected house prices to fall across 2019, especially in London—the worst prognosis since June 2016, in the immediate aftermath of Brexit.
• Rightmove has forecast that house prices will remain flat in 2019, but fall up to 2% in London and commuter areas in 2019.
• Property giant Savills is predicting a modest 1.5% growth in house prices across the UK, but a 2% slump in London, but cites affordability more than Brexit and the locking out of buyers for the fall.
• Cluttons, a firm of chartered surveyors and property consultants, predicts that residential property values will tumble 10% before recovering in 18 months time.
• The BBC polled the following experts about their predictions for property values across 2019
•     Richard Donnell, property market analysts Hometrack: 3% rise
•     Andrew Montlake, mortgage broker Coreco: 1% to 2% rise
•     Henry Pryor, housing market commentator: 5% fall
•     Miles Shipside, property portal Rightmove: no change
•     Andrew Burrell, Capital Economics: 1% rise
•     Simon Rubinsohn, Royal Institution of Chartered Surveyors: no change
•     Russell Galley, mortgage lender the Halifax: 2% to 4% rise

 

As you can see, there’s no consensus about how Brexit will impact house prices, even if we could predict what flavour of Brexit (Norwegian, no deal, “we’ve left the EU by mistake”) we’re getting at the end of March. Unless you urgently need to buy or sell, it might be wise to hold off and see how the market shakes out. But bookmark those mortgage comparison sites, because if prices crash, you might be able to snag a deal.