What does Brexit mean for house prices?

There’s no denying that whatever your viewpoint is on Brexit, the uncertainty around when the UK will leave the EU, and the terms under which it may happen, is causing property market jitters.
EU leaders voted in the early hours of this morning to extend the UK’s Brexit deadline again, this time until 31 October.

What might a no-deal Brexit mean for house prices?

While MPs have repeatedly voted against the UK leaving the EU without a deal, the results are not legally binding. A no-deal Brexit remains the default position if an agreement cannot be reached between the UK and EU.

Many business leaders and financial experts have expressed concerns about the potential consequences of leaving without a deal.
In September 2018, Bank of England governor Mark Carney warned that leaving the EU without a deal could send house prices tumbling by a third, and in February this year he added that UK growth would be ‘guaranteed’ to fall in the event of a no-deal Brexit.

So, what does all of this mean for the property market, and what impact has the vote to leave the EU already made on house prices and sales volumes?

What’s happened to house prices since the Brexit vote?

House prices did stagnate for a while following the referendum in June 2016. This could well have been down to the usual pattern of prices growing in spring and plateauing over summer, which we also saw in 2017.

But, with Brexit looming ever closer, house prices suffered a bigger post-summer dip than usual in 2018, dropping from a peak of £232,797 in August to £230,630 in November.
They recovered slightly in December but fell further in January 2019, with the latest ONS House Price Index reporting the average UK house price as £228,147 – the lowest it’s been since May last year.

Are UK house prices falling?

Looking at year-on-year house price change over the longer term can be another useful way of understanding what the market’s doing.
The rate of house price growth plummeted in the year after the referendum everywhere in the UK except Scotland.
It has continued to decrease in England ever since, and Scotland also dipped back down to only minor growth of 1.31% in January. However, there was more significant growth in Wales (4.64%) and Northern Ireland (5.45%).
It’s worth bearing in mind that, even if the rate of growth has decreased, house prices themselves haven’t – and many argue that the slowdown in England is simply a long-overdue market correction.

Transaction volumes since the referendum

Another way of judging the health of the housing market is to look at transaction volumes, meaning the number of property sales in any given month. A lower number of sales can indicate market uncertainty, which is often triggered by events such as an election or a referendum.

As you’ll see in the graph below, the referendum didn’t seem to have much of an impact on transaction figures.
The big spike you can see was caused by the April 2016 introduction of a 3% stamp duty surcharge for buy-to-let investors and people buying second homes, with thousands rushing to buy just before the change came in.

After the April transaction crash, numbers slowly crept up again. According to HMRC’s most recent seasonally adjusted figures, there were slightly more house sales in February 2019 – 101,780 to be exact – than in the same month the year before (99,060).

Evidence also shows that it’s taken people a lot longer to sell their homes recently than in previous years. In January, the average time for a property to go under offer shot up to 77 days, the highest on record.

It fell to 71 days in February, still slower than in previous years – and many commentators believe this is due to nervousness around buying a home in the run-up to Brexit.

What can you do?

Brexit is still an unknown, but what we do know is that you should ensure that you have a good mortgage deal and we are best placed to help you with this. If you are planning to buy, this should always be a long-term investment and the decision is far more personal than what is going on in politics.

We can help you establish what is affordable to you and ensure that the mortgage you take on is well within your affordability.

*Source ONS, HMRC UK property transaction stats and Which

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