The recent announcement that the United Kingdom is to leave the EU has resulted in widespread announcements regarding the possible effects it may have on the UK housing market. It’s early days, but does Brexit mean that house price growth is over, and the supply of new homes will be reduced making it harder for buyers to get on to the property ladder?
Some have suggested that British property prices will drop by up to 18% in the coming 12 to 18 months which in return would raise the cost of mortgages and therefore lower demand for property. History shows that property prices dropped nationally by 18.7% between the peak of 2007 and bottom of the market in 2009. Having said this, London’s housing market is famously resilient and the possibility of the Bank of England dropping interest rates to 0.25% or even 0% over the summer of 2016 will go some way towards buoying up a teetering economy, as will George Osbourne’s latest announcement that corporation tax is likely to be cut to an all-time low of 15%.
Brexit could be considered a positive move for first time buyers, who may subsequently benefit from lower house prices. Both buyers and sellers will be carefully watching market activity and the effects upon it of the Brexit vote. Uncertainty will continue until David Cameron’s replacement has been appointed, until Article 50 is invoked or even longer, whilst the UK negotiates the terms of its exit from Europe.
Mark Hayward, managing director of the National Association of Estate Agents, and David Cox, Managing Director of the Association of Residential Lettings Agents, made a joint statement that both prices and rents will remain stable in the short term, but that no one can be certain about the next quarter’s performance, as political instability and market unrest could lead through into prices.
Consumer confidence is unsettled and it’s likely to be some time before there is greater clarity around the long term effects.