What will Brexit mean for house prices?
Whether you’re a staunch remainer or avid Brexiteer, there’s no denying that the uncertainty around when the UK will leave the EU, and the terms under which it may happen, is causing property market jitters. After weeks of speculation, prime minister Boris Johnson has now shared the details of his proposed Brexit deal. The EU has said that ‘work still needs to be done’ to reach a deal that both sides are able to accept, but Mr Johnson has said that Brexit will happen on 31 October with or without a deal. So what does all this mean for the property market? The economic uncertainty caused by Brexit has undoubtedly affected the market, with house price growth slowing year-on-year and the number of sales taking a dramatic dip in recent months. Rumours of a base rate cut before Christmas could also create further confusion for people weighing up whether to move house or remortgage. We’ve analysed market activity before and since the Brexit referendum and spoken to experts from the estate agency, building, mortgage and buy-to-let sectors to bring you the insider’s guide to what could happen over the coming months.
What will a no-deal Brexit mean for house prices?
While many MPs are strongly opposed to it, a no-deal Brexit remains the default position if an agreement cannot be reached between the UK and EU. Many business leaders and financial experts have expressed concerns about the potential consequences of leaving without a deal. Accountancy firm KPMG has predicted that house prices would probably fall by around 6% following a no-deal Brexit, but that they could drop by as much as 20% in a worst-case scenario. In July, the Office for Budget Responsibility said that a no-deal Brexit could lead to house prices falling by almost 10% by mid-2021. Looking further back, Bank of England governor Mark Carney said in February that UK growth would be ‘guaranteed’ to fall in the event of a no-deal Brexit.
What’s happened to house prices since the Brexit vote?
House prices did stagnate for a while following the referendum in June 2016, as you’ll see in the chart below. However, it was fairly normal for that time of year: prices generally grow in spring and plateau over the following few months, a pattern that was repeated in 2017. But, with Brexit looming ever closer, house prices fell much more sharply than usual after last summer. The good news if you’re a homeowner is that prices have recovered over the last few months, with July 2019 seeing the highest average house price on our chart at £232,710. As you can see in the graph, it’s normal for prices to start improving in April, so this indicates a return to a more usual seasonal pattern.
What’s the pre-Brexit market like for sellers?
Two commonly used measures of how the market is performing for sellers are stock per branch – which is the average number of properties on each estate agency’s books – and time to sell. It’s taken people longer to sell their homes recently than in previous years. In January, the average time for a property to go under offer shot up to 77 days, the highest on record. It has since fallen, dropping to 62 days in June and remaining level in July and August, but that’s still much slower than in previous years. Many commentators believe this is due to nervousness around buying a home in the run-up to Brexit. Stock per branch is only slightly up year-on-year, from 52 in August 2018 to 54 in August 2019. This could be indicative of seller frustration, with data agency TwentyCi pointing to 895,000 homes having been withdrawn from the market over the past year.