After the referendum held in 2016 in which the British public democratically voted to exit the European Union, it is safe to say there has been a lot of uncertainty about a lot of things. One of these things is the status of the housing market.
Britain’s housing market is starting to grind to a halt in certain parts of the UK as the time for our departure from the EU draws ever closer. In fact, prices in London fell 0.4 per cent over the last year. The UK also saw weak growth for the East and South East of England. The number of sales in these areas has seriously declined, causing the prices to drop.
As a result of these revelations, many potential house buyers are asking themselves two important questions. First of all, is Brexit to blame for this decline in the property market? And secondly, how might it take effect on house prices as Britain’s negotiations with the EU as it reaches its climax in the months ahead?
How has Brexit affected house prices so far?
There have always been concerns that the Brexit Vote would lead to a rapid crash in the price of property, but these have not yet really come to fruition since the UK has not actually yet left the EU. However, house price growth has well and truly slowed down since the EU referendum result was announced on the 24th of June 2016. There is considerable variation depending on the area, however.
Prices in Northern Ireland and the North, South West and the Midlands of England grew at roughly the same rate as it did before the referendum, which is about 4 to 5 per cent a year. Meanwhile, the growth in property prices in Scotland has actually increased significantly. It is London and the commuter belt which have taken the hardest hit in decreasing house prices.
At the time of the referendum, house prices in London were growing at an annual rate of 12 per cent. However, recent statistics show that this fell by 0.4 per cent in the year to May this year – this, in turn, has dragged down the overall national average significantly.
At this point, the biggest factor in the fall is the lack of demand for buy-to-let investors and this is trickling down to other industries such as mortgage applications, second charge mortgages and bridging loans. Tax and various regularity changes have eaten into landlords’ profits and have ultimately discouraged potential investors from being able to buy new properties to rent out.
What could happen next?
Essentially, what Brexit means for the housing market is what it means for the economy. This is because the housing market is very influenced by wages as well as interest rates, both of which will be affected by Brexit.
Many experts do expect that Brexit will have a negative effect on wages to some extent, adding that if the UK was not leaving the EU, the wage growth would actually be higher.
The truth is that we will not know the full impact the Brexit will have on house prices until Britain and successfully and officially departed from the EU.