If you’re thinking of buying or selling a home in the next few years, you may be concerned about any impact Brexit might have. The UK’s decision to leave the EU was one that shocked the world, and several months later, no one is any the wiser about the exact plan.
Prime Minister Theresa May said that Article 50 will be triggered early in 2017, beginning the long process of departing the EU. However, the Supreme Court might decide in the New Year that May cannot make this decision alone and therefore a Parliamentary vote would be required to trigger Article 50. Whenever the process begins, it will take around two years to complete.
Let’s take a look at what the various experts believe will happen to UK housing prices over the next few years as a result of Brexit.
The immediate impact
The housing market didn’t see much of a dramatic impact immediately after the vote to leave. Mortgage lender Halifax reported a one per cent drop in residential house prices in the month following the decision. It claimed this decline was more likely related to the fact the market is currently experiencing a low-term slowdown, as it is too early to tell what the real impact of Brexit will be.
House prices will rise in 2017, except in London
Rightmove predicts that 2017 will be the seventh consecutive year for national house prices rises and that they will increase by around two per cent. Miles Shipside, a director at the company, said that the soaring demand for residential housing is currently overriding any feelings of nervousness.
This positive boost will not apply to inner London, though, where prices are set to fall by five per cent in the same year. In 2016, some boroughs have experienced double-digit falls, such as Camden. There, prices are 17.7 per cent lower than they were in December 2015.
Buyers to remain cautious in 2017 and 2018
Savills also believes the London housing market will suffer slightly because of Brexit, as it predicts that prices in the area will remain flat. Of course, this is good news for buyers. While Savills does not think house prices will fall nationally – thanks in part to low interest rates stimulating borrowing – it does suggest that buyers will be “more cautious” over the next few years.
Lucian Cook, Savills’ head of residential research, said: “A realisation that Brexit feeds into the wider economy, people’s prospects for earnings, people’s prospects for employment and then that beginning to filter through into the hard economic reality…is likely to make buyers more cautious.”
As a result, the number of London transactions will fall by 16 per cent in 2018, Savills states.
House building activity to slow again
Property management company JLL forecasts that house prices will stay flat until 2019, once the cloud of uncertainty has lifted. In 2017, prices will increase by just 0.5 per cent, a figure which will climb slightly to one per cent in 2018. House values will pick up from thereon, rising two per cent in 2019 and four per cent in 2020. Wales, the North-East and the South-West will experience the slowest house price growth over the Brexit period.
However, JLL is more concerned about the fact it believes house building activity will slow. In 2017, just 134,000 housing units will be built, compared with 146,000 in 2015. The House of Lords recommends that 300,000 new homes are constructed every year. This lack of available properties, combined with a climbing demand for housing, will help house prices increase in 2018, JLL states.
While no one can truly know the impact of Brexit until an agreement is reached and the process to leave begins, the potential outcomes aren’t likely to hit buyers or sellers hard. If house prices drop or remain flat and interest rates stay at their historical low, buyers have a greater chance of securing a new home. The lack of construction activity could mean that competition is fierce, though.
If house prices continue to rise steadily, sellers don’t have much to be concerned about either, as they will still be able to obtain a good price for their property. Unless the majority of buyers choose to wait until after Brexit to make a purchase, the competition may help prices increase further, too.