PRIME Minister Theresa May takes a much stronger Brexit stance.
There’s still time for a deal to be secured, but will a ‘no-deal’ Brexit impact house prices?
Last week the Governor of the Bank of England Mark Carney met with senior Government Ministers to discuss possible outcomes of the UK leaving the European Union without an agreement with Brussels.
One of the most notable warnings the Governor delivered was on house prices. He painted a grim picture by suggesting house prices could plummet by as much as 35 per cent over three years, mortgage rates could spike, the pound could fall along with inflation and many homeowners were at risk of being in negative equity.
It’s reported in The Sun that the Home Secretary Sajid Javid and Matt Hancock, the Health Secretary, wern’t too impressed with his pessimistic overview.
The Bank of England had previously warned house prices could drop in its annual “stress test” which it carried out in November 2017.
Managing Director of Visionary Finance Hiten Ganatra has a more optimistic view. He says:
“We always need to keep in the back of our minds that these forecasts from the Bank of England Governor provide worst case scenarios. A survey of independent forecasts by the Treasury in August resulted in only one forecaster predicting a fall of 3% this year and no decline of house prices in any subsequent years. So the worst case scenario is clearly not the overall expectation”
“The state of the UK economy is only one of many factors that affect house prices. Demand and supply factors remain key components and with there being a strong demand for ownership and with us not building sufficient homes the gloomy picture set out by the Bank of England Governor seems far-fetched. Interest rates remain low for borrowers, there are good incentives for first-time buyers and developers are building. We need to ensure that continues.
“I tell my clients that it is still a good time to buy. It’s impossible to predict what will happen to the economy but the fundamentals are still strong. The RICS recently reported that house price growth remains strong and that rents will rise by 15% in the next 5 years creating a strong appetite for both owner occupiers and buy-to-let investors also”.
Carney’s warning was met with a little scepticism in some other quarters too.
A survey of 10 economists for Bloomberg said house prices are “highly unlikely” to plunge as much as 35 percent in three years.
The survey offers a more positive outlook on the prospects for the U.K.’s property market as analysts and economists try to parse divergent signals. It adds to other encouraging signs in recent weeks pointing to a small rebound in home prices after the longest losing streak since the financial crisis.
Data compiled by property website Rightmove said asking prices for U.K. house prices rose 0.7 percent in September, led by stronger sales.
Nationwide, home values in August notched the first increase in five months, according to a report by Acadata.
It’s not all doom and gloom.
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