How will Brexit Affect UK House Prices and Mortgages?

With Brexit the hot topic of conversation everywhere you look, it’s no surprise that the looming prospect of it is having an impact on every strand of the economy. The housing market isn’t immune, although it might seem to observers that things had continued as normal. In fact, the latest HMRC UK Property Transaction Statistics (which have been seasonally adjusted) show that there were more house sales in December 2018 than in December 2017.

This could suggest that it’s business as usual, but that’s unlikely to remain the case as we get closer to Brexit, so we’ve aimed to cover some of the big questions for you.

 

Are House Prices Going to Fall After Brexit?

The simple answer is that it depends on the type of Brexit that occurs. The current forecast for 2019 from the RICS Housing Forecast is that house prices will remain stagnant during the year. One of the reasons for this is that housing stock levels remain low, with a lack of new properties being listed for sale according to their figures. This is compounded by the second-hand market where sellers seem to be sitting and waiting rather than jumping into the market and would-be buyers are also making fewer enquiries.

However, this could be a chicken and egg scenario – homeowners are putting off listing their properties for sale because of the warnings that house prices might fall, which is causing the apparent stagnation in the forecasts.

 

Who Will Profit from a ‘No Deal’ Brexit?

 

Mark Carney, the governor of the Bank of England (BoE), highlighted the risks of a disorderly Brexit last year. The worst-case scenario plan the Bank had developed saw house prices falling by up to 30% over the course of three years. However, this was the worst-case of all the worst-cases, although a ‘no deal’ Brexit may result in house prices falling in the first half of 2019 amid all the uncertainty, with the BoE suggesting this could be around the 14% mark.

In the case of ‘no deal’, then, would anyone benefit? One of the BoE’s points is that a disorderly Brexit might cause the pound to decrease in value and this could put pressure on inflation along with interest rates. In this scenario, those searching for low mortgage rates (such as first-time buyers) might struggle.

Buy-to-let portfolio landlords and no-chain buyers might find that the drop in property prices if it occurs allows them to snap up properties cheaply. However, this does depend on the number of properties on the market and, as we’ve seen above, the forecast isn’t promising on that score.

 

Should I Sell My House and Rent a Property Before Brexit?

Making any assumptions about the market is risky, especially when there are hyper-local factors to consider too. While the national picture might suggest prices will fall and that you’d be better selling a property, the local market and local issues such as crime levels will make as much of an impact on your decision.

There are also lots of costs associated with selling that might make you wince. Once you factor in estate agency fees, rental fees, stamp duty on buying another property in the future, legal fees, surveys and any moving expenses (x2, remember, if you plan to get back on the property ladder), the expense and hassle might outweigh the perceived benefits.

Equally, property for many people is about the long-term. If you’re in a home that you’re comfortable in, the good advice might be to wait it out and see what happens in the future. After all, house prices do tend to rise in line with wage growth, so betting against house price rises in the long-term may not be a successful strategy.

 

How Might a ‘No Deal’ Brexit Affect Property Prices in the UK?

 

Taking the BoE’s stress-tests into account, a ‘disruptive’ Brexit, the 14% drop in house prices scenario would be rapid and it might take some recovering from. However, as mentioned above, long-term trends suggest that prices always will recover – it might just be a question of how long we need to wait and what other factors are at play.

It’s important to remember that the housing market can be volatile, and it’s not just Brexit that causes problems. Every alteration in planning laws or dip in the economy can result in property prices falling. Many of us have already experienced during the 2008 financial crash and the difficult years that followed. So, while ‘no deal’ Brexit is certainly a looming menace, it isn’t the only issue at stake as successive governments attempt to deal with a housing stock shortage.

 

Is the UK Heading for a House Price Crash After Brexit?

Unfortunately, the answer is still that no one knows and, even if politicians agreed right this minute on what’s going to happen, the future for the housing market would still be hazy. There are always reasons that people will have to sell their home or look to buy a new one. Death, divorce, debt, schooling, job changes and the one house they can’t say no to will always play a part in keeping the property market moving.

So, we might be hedging our bets by saying that Brexit could have an impact on the housing market but that the market will still keep moving. However, it does seem likely that business will carry on, if not quite as usual, but in a form that we’re familiar with.