Brexit Nears – What’s the Future for House Prices?

According to the Office for National Statistics, house prices in London fell 0.7% over the year to June and transaction levels were down 20% year-on-year. Many are blaming Brexit anxieties for this dip.

Of course, it is highly unlikely that Brexit is the only factor pushing down house prices in the capital. The housing markets in London and the south-east are stretched close to the limits of mortgage regulation in terms of loan-to-income ratios. In addition, the UK’s most expensive markets have had lower numbers of investor buyers over the past few years.

Across the country average house prices have increased 3% in the year. The Office for National Statistics reported that house prices in England grew slower than other countries of the UK with house prices in Wales and Scotland showing an increase of 5.8% over the last 12 months and Northern Ireland an increase of 4.8%. Regionally in England, the West Midlands have shown the highest growth with prices having gone up by 6.1% to September.

So what will happen to house prices as Brexit nears? There are a lot of uncertainties at present with the Prime Minister’s Brexit withdrawal agreement teetering on the brim to being passed (or not) by Parliament. A recent warning by the Governor of the Bank of England, Mark Carney, that a no-deal Brexit could cut more than 30% off house prices has also given the market the jitters, although Mr Carney did qualify that this represented an ‘extreme scenario’ and the ultimate effects of Brexit on mortgages and house prices will depend on the details of any deal.

Robert Gardner, Nationwide’s Chief Economist stated that “if uncertainty lifts in the months ahead and employment continues to rise, there is scope for activity to pick-up through next year” as the squeeze on household incomes is already moderating and interest rates are only expected to rise to a limited extent and at a modest pace.

Analysts have said that the crucial moment for the housing market will not be the scheduled exit date of 29 March 2019 but is more likely to be the formation or collapse of any transition deal, how long the uncertainty lasts and the economic consequences of whatever arrangement is eventually agreed. The options of ‘deal or no-deal’ will present different impacts. Thankfully, however, the housing market is not as quick to react as currency or the stock exchange and there is likely to be more of a softening than a sharp fall in house prices. The Express has also expressed the view that if there is a fall in sterling, foreign investment in UK properties might even be spurred.

Analysts at UBS have said the housing market might still prove to be relatively robust for a range of reasons including the government’s Help to Buy scheme. At present there are no visible signs of distress in the financial system and no expectation of sharp reductions in mortgage lending. As the UK disengage from the EU, key trade deals worldwide may impact on buyers’ confidence.

Few analysts however expect a strong growth similar to that experienced from 2011 to 2014, and indeed Rightmove is forecasting a 0% growth across the UK in 2019.

Charlotte Giver

Charlotte is the founder and editor-in-chief at Your Coffee Break magazine. With a background in PR working in Los Angeles and Barcelona, Charlotte has been running Your Coffee Break from the YCB HQ in London’s Covent Garden for the past 8 years. She is a mother, an avid reader, runner and puts a little too much time into her morning brew.

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