What Brexit might mean to the UK housing market.
You may not be surprised to read that we’ve had a little difficulty coming to terms with the fallout from the Brexit vote – but it’s not necessarily what you may expect.
If you follow the property press, you will no doubt have read that many were predicting a drop in house prices if the UK voted to leave the EU. By how much depended on who you listened to but figures being bandied about went as high as 15 to 20 per cent. Of course, once the result came through, the doom mongers went into overdrive. London agents in particular were forecasting a collapse and even some of the usually level-headed sources were talking about the “moment the bubble burst”.
But what we need to remember is, when it comes to house prices, no one – not George Osborne, not the National Association of Estate Agents, not the property pundits and not even the Bank of England – has been dealing in cold, hard fact. It’s mostly conjecture and the truth of the matter is that no one knows for sure what your house will be worth at Christmas time. There are just too many variables.
As an example, at one point, it looked like the UK would be largely rudderless for as long as four months while the Conservatives sorted out a new Prime Minister. We’ve actually ended up with a semblance of a Government much quicker than that, which has seen Sterling rally a little on the foreign exchanges. Then it looked like the Bank of England would lower interest rates, making mortgages even more affordable – but that hasn’t happened either.
Both of these events could have a bearing on property prices as they affect our confidence in how the country is being run, how much of our capital we’re willing to risk on significant purchases and therefore –albeit indirectly – on what value we place on our homes.
It is therefore hugely frustrating to listen politicians – and even fellow property professionals – damaging public confidence by forecasting that house prices are on the edge of a precipice and edging ever-closer to a dramatic decline.
Guess what? If you tell enough people often enough, it’s likely to become a self-fulfilling prophecy.
In our local paper, one story focused on a Rightmove study which shows the value of the average Yorkshire home has fallen by over £2,000 since the Brexit vote. Okay … that’s a fact, largely brought about by post-Brexit pessimism. However, no one seems to be reporting – at least not with any emphasis – that the Royal Institute of Chartered Surveyors reckons, come 2021, homes will be worth 14 per cent more than they are right now. Admittedly, that is less than the 20 to 25 per cent per cent forecast about 18 months ago but it’s still an increase. In other words, if you buy a home today, it’ll still be worth quite a bit more in five years’ time and, to be honest, that doesn’t sound very much like a bubble bursting to us…
Caution is understandable in the current climate and it’s perfectly normal in the wake of an election for buyers and sellers in the property market to adopt a watching brief while they assess the lie of the land. It’s also normal for things to stagnate a little in the summer months as people take their annual holidays. The shock Brexit result may well be exacerbating that and prices may have dropped a little more as a result. However, as events unfold over the summer months and the UK returns to a more even keel, there’s every chance – left to their own devices – property prices will recover and, although the pace of growth may not be a meteoric, they could quite easily continue to rise.
Why? Well, simply because the drivers which have pushed house prices higher and higher over the last few years haven’t simply gone away overnight. We’re still desperately short of housing stock as well as people with the skills to build new homes. Until that’s resolved, it’s difficult to see any lasting change as there will still be too many buyers for too few homes.
You may not like the Brexit result. You may have much preferred to have remained a part of the EU. But when it comes to the property market, we would encourage everyone to stick to the facts – even if, right now, there aren’t that many of them …