Whether you voted to remain or leave the European Union on the 23rd of June 2016, there is no denying that the uncertainty of the result is causing property market jitters years later and we still haven’t left the EU. Last week’s general election saw Prime Minister Boris Johnson retain his seat for the Conservative Party. After the result, he said the general election had proved that the people want his party to get Brexit done. However, there is still uncertainty as to when the process of leaving the European Union will be finalised and completed. In fact, conveyancing solicitors across the UK have been wondering exactly this as the market suffers its slowest activity in almost 2 years. So, what effect is Brexit going to have on the property market, and what have we seen so far? Let’s take a look.
What’s Been The Impact So Far?
There’s no denying that the economic uncertainty that has been caused by Brexit has affected the UK’s housing market. House prices have slowed down year-on-year, and the number of house sales have decreased since the UK voted to leave the European Union. And, while this hasn’t deterred home buyers, sellers have been put off by the uncertainty over house prices. For example, London and the South-East, which were the 2 areas that once drove house price growth, have now become stagnant. However, other areas of the UK have experienced growth year on year. For example, Northern Ireland and Wales have seen an increase in house prices of more than 5%.
What If The UK Leaves Without a Deal?
The housing marketing in the UK is extremely difficult to predict, and while we know that a “no-deal” Brexit will have a negative effect, it is hard to predict the extent of such an effect. However, one thing we can be sure of (as we are already seeing it) is that London will be the most negatively impacted by a “no-deal” Brexit. London attracts more foreign investment than any other city in the UK, which means it will take the brunt of a no-deal” Brexit aftershock. Prices in London are already in decline, so a further downward trajectory is highly likely if the UK leaves the European Union without a deal. However, whatever the outcome is of Brexit, London will still remain a highly desirable property location for both those already living in the UK and those who wish to move into the country. But, really, this all does depend on consumer confidence. If it remains high, then house prices will remain steadily the same. But, if it dips, then house prices all across the UK are likely to suffer as a result.
What If The UK Leaves With a Deal?
Boris Johnson has been negotiating a deal that will set the UK on course for a harder Brexit than the one that was proposed by Theresa May. However, it is unlikely that this deal will result in a housing market crash. There is, however, a possibility that there will be a market slow down whether we leave with a soft or hard Brexit deal. The impact won’t be quick to notice either because the housing market doesn’t react as quickly as the stock exchange. Because of this, it isn’t likely that there will be an immediate large scale reduction in house prices.
Will Mortgages Be Harder to Secure After a Hard Brexit?
If the UK leaves with a hard Brexit, then this could have an immediate impact on the mortgage market. Interest rates would likely be cut if there is a “no-deal” Brexit, but banks might not be willing to lend as much because of the UK’s uncertain economic outlook. So, it could be harder to secure a mortgage. At the moment, mortgage rates are considerably low, and a lot of prospective home buyers will want to secure some security with a low-rate mortgage as we move into an uncertain time period. However, don’t rush into a fixed-rate mortgage deal without doing your research and looking at other alternatives. There are a lot of flexible mortgage products out there that would leave the possibility of remortgaging open if interest rates did change after we leave the European Union.
What we do know is that the UK has already been affected by post-referendum conditions even though we still haven’t the European Union. The economic uncertainty has resulted in home buyers taking a more cautious approach. London has negatively reacted to this uncertainty, but prices in Northern Ireland and Wales have been resistant and have seen considerable growth. Despite this, the government’s focus needs to be on mitigating a housing crisis should it occur once we leave the European Union.