Brexit continues to loom over the UK economy, but with negotiations moving forward and a date for the second meaningful vote, is a deal in sight? And what could that mean for the UK’s housing market?
The risks to the economy of a ‘no deal’ Brexit have been widely discussed. The guesses have come in thick and fast, and vary from no affect on the housing market to the Governor of the Bank of England Mark Carney’s wild suggestion that prices could plummet by as much as 35 per cent over three years.
Would a Brexit deal see more movement in the housing market?
There is a very strong possibility a Brexit deal could lead to a spike in spending. Many potential buyers are taking a ‘wait and see attitude’ holding off on investing either to get some longer term certainty over the economic environment, or because they are chancing their luck for a bargain if house prices do slow. But if a deal was secured, regardless of what it included, the certainty would give buyers clarity and would break the ‘wait and see’ effect.
Is the wait and see attitude real?
As soon as the UK voted for Brexit, government officials and businesses began to plan for an unknown and unprecedented future.
Just months after the referendum in 2016 polling showed changing attitudes. Plentific.com, surveyed 1,063 adults across the UK and revealed that 10% of homeowners were more likely to improve their home than sell it in the current market. It also revealed that 12% of homeowners were less likely to sell in the next 3 years.
That trend seems to have continued as the Brexit negotiations have progressed over the past two years. The latest monthly report from the National Association of Estate Agents (NAEA) showed that demand from prospective home buyers and the supply of available properties for sale both fell by 13% in October.
Is it all about Brexit?
No. There are a number of other reasons people are adopting a ‘wait and see’ attitude. They are unsure about interest rates, the record lows we have enjoyed can’t last forever. Even with the Help to Buy scheme first time buyers still find it hard to save for a deposit. Landlords too have taken big hits in recent years including changes to stamp duty and changes to tax relief. All of these issues would still be apparent without Brexit.
Is it all bad?
A house price slow down, not crash, can have its benefits. Lower prices could help young people get onto the housing ladder, giving the so-called ‘generation rent’ a chance to buy.
But, it’s important to look beyond the doom and gloom headlines. The evidence of a house price slow down is mixed. For example, the new index report from Hometrack suggests Brexit is not having much of an effect on housing in key regional cities with six of the largest cities recording year on year growth figures over 6% with Leicester up 7.7%, Edinburgh up 7.4%, Manchester up 6.3%, Birmingham up 6.2%, Nottingham up 6.1% and Liverpool up 6%.
What will happen next?
Visionary Finance Managing Director
Hiten Ganatra is confident the housing market is robust for one key reason: demand still far outstrips supply.
He said: “A Brexit deal would give us all, the certainty we need to do business and would undoubtedly see confidence in our housing market strengthen.
“But if we don’t get a deal or we delay leaving, or have a second referendum, I’m not convinced the housing market would collapse. Perhaps wishful thinking, though it’s important not to forget the significant lack of supply. We have not and are still not building enough homes. That means, while demand may slow due to the ‘wait and see’ attitude, those people, those families, still want a home to call their own.
I’m not going to make any predictions. That said, some clarity will be provided before March 29th, we just don’t know what that could look like.”
- If you are looking for a mortgage it is always best to talk through your options with an advisor. Contact our experienced team on 01908 465100. We are a fee free mortgage based with offices in Milton Keynes and London.