Brexit and the housing market | Love Your Postcode™
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Brexit and the housing market

Brexit and the housing market

Brexit … that moment is about to happen and all homeowners ask the same questions. Will Brexit affect the housing market? Will house prices be affected when Britain leaves the EU?

The Bank of England says the impact of the UK leaving the EU on the housing market could be significant. It has said house prices could fall by up to 30% from pre-Brexit levels if there was no deal or a “disorderly Brexit”.

Brexit and the housing market

The UK’s financial regulator, the Financial Conduct Authority, has said the risks of the draft Brexit agreement were “preferable to the risks of a no-deal scenario”. “Leaving the EU creates a number of risks for us regardless of the form of exit,” the FCA said in a report.

The UK authorities have engaged in extensive contingency planning. As a result,
the FPC has judged the UK financial system to be resilient to a disorderly exit
without a deal or implementation period. Nonetheless, it notes that some market
volatility is to be expected in this scenario, but this should not affect the ability of
markets to function effectively.

Ultimately, the impact of a no-deal scenario greatly depends on the extent to
which the UK and EU can continue to cooperate and take action together to
minimise disruption. The Government, the FCA and the Bank of England/PRA have
taken steps to ensure appropriate mitigation is in place for risks that can be dealt
with unilaterally, says the report.

What will a no-deal Brexit mean for the housing market

What will a no-deal Brexit mean for the housing market

Meanwhile, in the housing market, property sales have fallen year by year and rumors of a base rate cut before December could create further confusion for people who are trying to change their home or try to buy a new home. Many business leaders and financial experts have expressed concerns about the potential consequences of leaving without a deal. The Office for Budget Responsibility predicted that a no-deal Brexit would lead to house prices falling by almost 10% by mid-2021.

The economic effects of Brexit were a major area of debate during the Referendum on UK membership of the European Union after the Leave vote. Supporters for remaining in the EU, argue that being in the EU has a strong positive effect on trade. Supporters for withdrawal from the EU have argued that the cessation of net contributions to the EU would allow for some cuts to taxes or increase in government spending.

The BBC reported on 28 April 2017 that property investment firm JLL data shows Asian investors accounted for 28% of the transactions in the UK property market in 2016, up from the 17% the year before — indicating that Brexit is not dissuading Asian property investors. The BBC also cited Chinese international property portal, which reported a 60% increase in inquiries into UK property in the prior 12 months. Property firm CBRE Group said in January 2017 that Brexit has increased risk in UK property markets by creating new uncertainties.

Property prices trend

The price of property coming to market falls by 0.2% (-£656) this month. This is the first monthly fall so far in 2019. While prices are traditionally weaker in the second half of the year, this year also sees the highest total stock per estate agency branch since 2015. With continuing political uncertainty we expect buyers in market sectors where there is an over-supply to have a stronger hand negotiating lower prices in the coming months.

With sound underlying market fundamentals, apart from the lack of confidence caused by the uncertain political outlook, there should be a better bargaining opportunity for those who have hesitated and missed the busier spring market if they can now find the confidence to engage without waiting for more certainty, says Rightmove.

Miles Shipside, Rightmove director and housing market analyst comments: “The housing market fundamentals remain largely sound in many parts of the country, but the current political climate means that the crucial ingredient of confidence has been impaired, and that is causing some potential buyers and sellers to hesitate.

With record employment, low interest rates and good mortgage availability, buyers have a lot in their favour apart from the lack of political certainty. Those who have postponed their purchase should note that estate agency branches have more sellers on their books than at any time for the last four years, so there should be more choice of properties to buy. It could be a good opportunity to negotiate a relative bargain in the second half of the year, if they can set aside the continuing Brexit distractions.”

A no-deal Brexit seems to be becoming ever more likely under Boris Johnson’s premiership as the crunch date of October 31 draws closer. But do UK homeowners need to worry that their houses’ value is about to fall?

Will house prices be affected when Britain leaves the EU

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Brexit and the housing market
By David Price