Are you thinking about buying or selling your house but are concerned or confused about Brexit and its impact on the UK property market? Are you worried there may be a housing market crash and you don’t know when is the right time to move?
The property market has certainly been hard to read of late. Since the referendum vote in June 2016, leading economists have been predicting that house prices would plummet. But that hasn’t happened yet, as all the major price indices show in the graph below.
National House Prices since the EU Referendum (Updated August 2019)
In fact, the most widely used index (the UK House Price Index), shows sustained growth in property prices since the vote of 2016 with the average house price in the UK rising from £205.462 pre-referendum in January 2016 to £229,431 in May 2019.
Although growth in house prices has got progressively slower, the bottom has certainly not fallen out of the property market, yet…
The Positives
A well as the steady growth in house prices, there are also a number of other factors that make UK property a good investment option at the moment.
Firstly, borrowers have benefitted from low Bank of England base rates for several years. This has meant mortgage rates have remained competitively priced as well. After a drop to their lowest point ever 0.25% in August 2016 post-referendum, rates rose to 0.5% at the end of 2017 then rose again to 0.75% in August 2018 and have remained at that level ever since. This affordability has fuelled a steady level of housing market growth.
If we crash out of the European Union without a deal, the property market may rally or it may stall or go into decline. If a fall occurs, we could see the Bank of England cut interest rates back to the record low levels of 2016 to re-stimulate the economy. So we would hope the market would be protected in all eventualities.
Secondly, the UK is currently experiencing a major shortage of new homes being built. While housebuilding targets are not being met and the shortage of affordable homes continues, average prices will continue to rise as there are not enough homes to go around.
Thirdly, the government’s Help to Buy scheme has enabled over 200,000 first-time buyers to get on the housing ladder. This initiative is due to be phased out soon after being criticised for contributing to house price inflation while lining the pockets of building developers and not helping those most in need. It is likely some form of ‘help to buy’ scheme will continue though., which is good for the property market.
As positive as this all may sound, this certainly doesn’t mean the property prices will continue their upward trend.
Brexit Property Market Risks
The country’s economy has just about coped with the market uncertainty since the vote in 2016, however, once we leave the EU the economic impacts may be felt harder.
The Office of Budget Responsibility recently predicted a 10% drop in house prices in a no-deal scenario (up to mid-2021) while the Bank of England governor Mark Carney’s famous leaked prediction to the cabinet that house prices might fall 35 per cent following a “no-deal Brexit”, still haunts us today; especially as a no-deal Brexit is looking more likely now Boris Johnson has taken the reigns at number 10.
Opinions are divided, however… The truth is nobody really knows what is going to happen if a no-deal Brexit occurs, or if Brexit even happens at all!
Shall I buy or sell now?
TV presenter Martin Lewis of Money Saving Expert fame sees positives in any scenario, saying: “House prices are a double-edged sword. If prices drop, it means they [houses] become more affordable for many not on the housing ladder. Those who already own houses don’t lose out in the short term as any price drops are just on paper.
He suggests: “If you want to sell your house and you get a decent offer that enables you to do what you want, maybe buy a new house somewhere else or maybe store the cash, then do it. Yes, you may look back in the future and say ‘if only I had waited it might have been better’ or ‘thank heavens, I didn’t wait it would have been worse’, but you can’t know that.”
Keep Calm and Carry On
Ruban Selvanayagam Co-Founder of sell house fast specialists Property Solvers, suggests:
“If you’re struggling to sell at the moment, our advice is to stay calm, ignore all media-led hysteria and pay close attention to the real facts.
The UK housing market works in cycles and – whilst it’s never easy to predict – some form of price correction will happen (Brexit or no Brexit). The country has experienced house price crashes in the 1980s, 90s and in the late 2000s years ago after the credit crunch. Every time, following a lull period, the market has recovered.”
Think of it as a rising and falling tide on which all houses are floating together.”
We love Ruben’s analogy! We look forward to seeing where the tide takes us and our fellow property investors over the next few months.
