What does a no-deal Brexit mean for the housing market outside London?

December 11th, 2018

With the prospect of a no-deal Brexit now a reality, many are wondering what that will mean for the housing market. Here our Managing Director Hiten Ganatra discusses his thoughts on what lies ahead.

What does a no-deal Brexit mean for the housing market outside London?

Much has been discussed about the already slow London housing market, but I’m keen to focus on places outside of London and what a ‘no-deal’ could mean for JAM families, those Just About Managing.

The Governor of the Bank of England Mark Carney has warned on a number of occasions that one of the possible outcomes of the UK leaving the European Union without an agreement with Brussels would be our housing market would suffer. Earlier this year at a Cabinet meeting 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 would be at risk of being in negative equity.

What predictions have been made by The Bank of England?

The Bank of England had previously warned house prices could drop in its annual “stress test” which it carried out in November 2017.

However, others argue otherwise. The Hometrack Cities House Price Index has reported a very limited direct affect by Brexit so far on the housing market. In fact cities outside of London are continuing to see strong growth in house prices. Leicester, Manchester, Edinburgh, Liverpool and Birmingham all experienced house price growth of 6 per cent or more in October.

That said, we have not yet actually left the European Union with the real life consequences that may bring. There is evidence to suggest buyers are holding off on buying property across the UK as they wait to see what life will look like post March 29th. Be it deal or no deal, people and businesses around the UK just want some certainty so they can continue to plan for the future.

If there is a ‘no-deal’ Brexit, it is safe to say our economy would take a hit. It would hit all regions of the UK. Jobs would almost certainly be at risk and if people fall into negative equity, it could be a perfect storm plunging families into a very difficult few month, perhaps years ahead.

Will interest rates drop?

Even in the event of a ‘no-deal’ there are things that would mitigate any hit to the housing market. As we all know there is a desperate shortage of homes on the market which will prop up overall prices. It is also highly likely the Government would put in place contingency plans to stabilise the economy. That could mean a drop in interest rates which would ease outgoings for families who find themselves in a difficult situation.

There are also good incentives for first-time buyers that would remain. Help-to-buy received an extension to 2023 in the Autumn budget, that together with the stamp duty change and the fact developers are building will help weather any storm. Any drop would make it an even more attractive time for those young people who could afford to buy.

My advice to my clients remains the same as it has since the 2016 referendum, it is still a good time to buy. It’s impossible to predict what will happen to the economy but I do believe the fundamentals are still strong.

Will house prices fall?

The RICS recently reported that house price growth remains strong and that rents will rise by 15 percent in the next 5 years creating a strong appetite for both owner occupiers and buy-to-let investors.

I believe a ‘no-deal’ Brexit is highly undesirable for those families just about managing.

The default option if the deal is unsuccessful is a ‘no-deal’ Brexit which will undoubtedly mean a short term hit to our economy and our housing market. But will your house value fall by 35%? No.

  • Visionary Finance is a fee free mortgage broker based in London and Milton Keynes. If you’re thinking of making an investment in the UK give us a call on 01908 465100 and our experienced team will work with you to make it a success