Brexit: UK house prices and what we know so far

Britain will leave the EU in just under five months (as if you didn't know) and much of the big talk away from hard Irish borders and European trade deals has been about the effect the UK's Brexit will have on the property market.

There are predictions aplenty, with some commentators suggesting an impending downturn in property prices and others sticking their necks out to claim the resilience of the UK market will stand firm.

One thing is for sure, though: Currently, the only certainty surrounding Brexit is uncertainty. So, with just under five months to go, here is Martin & Co's guide to what we know so far...

THE 'BREXIT AFFECT' ON HOUSE PRICES

Or is it? In among all the doom and gloom surrounding the UK's Brexit negotiations, property away from the slightly more downbeat London and South East is digging deep and showing some determined resilience in the face of political and economic uncertainty.

The Halifax's latest house price index, released last week, revealed average property prices had increased slightly by 0.7% in October compared with September, while annual growth remains slap, bang in the middle of the early 2018 predictions of 0-3% growth at 1.5%.

While the rate of growth is the slowest for five years, pointing, in part, to buyer apathy during the continued EU exit negotiations, an increase in prices nonetheless goes against predictions from the Brexit doom mongers.

THE LONDON PROPERTY MARKET

It's easy to forget that tarring the whole of the UK with the same property growth brush is foolish. As always, growth and decline largely depends on where you live.

In London and the South East, property prices have felt the pinch more than most. New development around the capital has increased stock, while the sheer weight of huge London property prices on the shoulders of buyers' deposits and ongoing Brexit uncertainty has also contributed to a lack of confidence.

The general consensus is the London market falls or rises depending on the level of international markets and foreign investment. The stagnation of the current capital property market would appear to suggest those investors are currently sitting on their hands until the fate of the UK's EU exit becomes clearer.

THE SITUATION IN THE REST OF THE UK

Elsewhere, and particularly in the North, the market continues to perform well. House prices in Northern Ireland, Scotland and Yorkshire have seen values rise above the national average over the past 12 months.

Buyers getting 'more house' for their money than London and the South East and thus more affordability on mortgages already boasting tempting rates, plus lenders lending willingly could all be acting as a boost for the northern market.

THE INTEREST RATE 'FEAR'

Post EU referendum in 2016, Bank of England governor Mark Carney urged homebuyers to proceed with caution given the potential uncertainty Brexit could cause to the wider economy.

One big concern for buyers is a rise in interest rates. The Bank of England base rate has remained historically low on the underside of 1% since 2009, but two rises in November 2017 and August 2018 have put the property market on an increased alert.

While not expected to rise to pre-2008 levels, a 'no deal' Brexit could see the Bank undertake further hikes in a bid to stabilise the economic wobble this could cause.

WHAT WILL THIS MEAN FOR LANDLORDS, BUYERS AND SELLERS?

An interest rate hike is never good news for homeowners not tied in to long-term fixed rate mortgages.

While mortgage rates rarely mirror the Bank's base rate, they do generally move in the same direction and this could raise affordability issues for those on tracker mortgages or sitting on the base rate with no tie-in.

For buyers already faced with the dilemma of whether to take the plunge or not during Brexit uncertainty, a rate rise would potentially see the current number of attractive mortgage rates on offer dwindle and raise fresh affordability concerns.

And for landlords taking advantage of low rates to increase their profits across buy-to-let portfolios, a rate rise would be an added pain following stamp duty increases on second homes and the section 24 tax changes currently filtering in until 2020.

HOW WOULD A FALL IN HOUSE PRICES AFFECT FIRST-TIME BUYERS?

First-time buyers are faced with the same 'do I, don't I' dilemma as other more established buyers.

They may be in a position where they have raised enough money to cover the deposit on a home, but are unsure whether now is the right time to buy.

With interest rates low currently, on paper now is a good time to purchase and get tied in to a fixed rate mortgage, while stamp duty benefits for first-time buyers have also provided those getting on the maiden rung of the ladder with a welcome boost.

However, with the uncertainty surrounding the housing market as we move into 2019, many first-timers are worried even a minor market decline could see them fall into the dreaded realms of negative equity.

WILL THERE BE A DEAL?

Good question and not one that is easily answered!

While an agreement with the EU initially looked imminent at the start of last week, news broke at the back end of the week which was sparked by a row within the Conservative Party over publishing legal documentation associated with the UK's proposal.

That left a deal within the next week looking extremely unlikely, according to Foreign Secretary Jeremy Hunt.

So, with the element of uncertainty remaining for the time being and Christmas on the horizon, the market looks as if it may have to wait until well into the New Year before buyers start to gently flex their muscles once again.

Much will depend on interest rates and just how they affect any potential correction in the market, not to mention how soon we receive some much needed certainty from those in the corridors of power.


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