Possible Impact of Brexit on UK’s Housing Market
Brexit has made common headlines in most news and business reports ever since the 2016 referendum. The UK Prime minister Boris Johnson is determined to see Brexit take place with or without reaching an agreement with the EU by 31 October. He demands the scrapping of the Irish backstop by the EU before he commits to any deal. In this piece, we’re going to look at how the housing market has been affected by Brexit and the expected impact in the near future. Please read on.
Impact as at now
The housing market has been affected by Brexit’s economic uncertainty, seen from the year-on-year and transactions drop by 16.5%. Following the June 2016 referendum, house prices were reported to have stagnated for a while before falling much more sharply than usual after the summer, last year. House prices were seen to be constantly falling month after month since August 2018 until April 2019, which indicated a return to a more usual seasonal pattern.
However, it’s not clear as to what extent Brexit has affected the fall in the rate of growth across the UK as some experts believe the impact can be due to a long-overdue market correction. Time to sell and stock per branch measures are the common measures used to determine how the market is performing for sellers. These have shown that in recent years, it has taken sellers longer to sell their property than in previous years.
What is the expected impact of a ‘NO DEAL’?
Even as the 31st October deadline approaches, MPs have voted against a no deal. However, the expectations are not legally binding as at now - a no-deal Brexit being the default position. Market experts and investors are also expressing their concern about what might happen if an agreement would not have been reached by then. According to the Office for Budget Responsibility, a no-deal Brexit would result in a fall in house prices by about 10% by mid-2021.
Mark Carney, Bank of England governor predicts a tumble in the property values by a third and a guaranteed fall in the UK growth in the event of a no-deal Brexit.
While the no-deal scenario is likely to see interest rates being cut, experts predict a risky economic outlook, hence expect banks to be less willing to lend. According to iNews, this will make it hard to get mortgages even for those who decide to buy. However, various mortgage advisers urge homeowners and buyers not to panic and make any rash decisions in an attempt to try and fix the low mortgage rates. Rather, they advise you to wait until it is clear whether the UK will leave with a deal or not. You should consider possible alternatives - flexible products that will give you an opportunity to remortgage should the rates start to change.
Brian Murphy, head of lending for Mortgage Advice Bureau, believes the Brexit period of uncertainty is an obvious contributory factor for the current lower levels of homes available - about 40% below pre-financial crisis levels of mortgages being approved.
Regions affected the most
Since the 2016 referendum, there has been a varied property price performance across the nation. Regions which once drove property price growth, like the South East and London, have stagnated. And some regions such as Northern Ireland and Wales have experienced more than 5% year-on-year increases.
What about the products bearing the formal EU standards, such as the CE marked fabrications in most construction materials? Will Brexit taking place affect these standards in any way? This is still an unknown yet to be confirmed sooner or later. Stay up to date for the latest information concerning Brexit and its consequences.