Formal beginning of Brexit not likely to have huge impact on UK property market
The UK property market is not set to see any major upheaval with the formal start to the two years of negotiation to leave the European Union, and might even benefit from an expected slowing in the economy.
Experts point out that the market did not see any huge effect from the decision to leave in the referendum last June and prices have been rising steadily with blips in London put down to stamp duty change.
While price growth might slow, this could be good news for first time buyers who are seeing affordability getting worse, especially in London, while an economic slowdown should mean that the chance of interest rates rising is kept low which means borrowing costs stay low.
Fionnuala Earley, chief economist of Countrywide, pointed out that expectations before the June vote that house prices would collapse were very wide of the mark. ‘House prices are still rising across the UK and continue to grow in London, which is arguably more sensitive to Brexit. But, over the medium term, it’s the effect of the outcome of negotiations on the UK’s economic performance, particularly jobs that will determine the effect on housing market prices and activity,’ she said.
Lucian Cook, head of residential research at Savills believes it may well make the Bank of England reluctant to increase interest rates despite the recent increase in inflation. ‘This will preserve affordability and points to a low turnover market, with little upward or downward pressure on prices,’ he explained.
The current demand for homes and lack of supply will outweigh the effects of any Brexit negotiation uncertainty, according to Russell Quirk, chief executive officer of eMoov, adding that it will be business as usual for the property market.
‘The London market remains impervious and, with such a shortage of stock, the overwhelming level of housing demand will plug any gaps of depleted buyer interest from further afield. Despite the high levels of uncertainty in the market, property values have continued to show signs of positive growth in 2017 and this will only strengthen as time goes on,’ he said.
‘Brexangst around leaving the EU has caused uncertainty in the market but the cooling rate of price growth over the end of last year has without a doubt been influenced more by the increases to stamp duty and second home tax, with both playing considerable roles in impacting the market,’ he pointed out.
‘With the initial Brexit fears now starting to subside and property values continuing to increase on both a monthly and annual basis, UK home owners should rest assured that the market remains one of the most resilient in the world,’ he added.
Indeed, in one sense the triggering of Article 50 which has started the formal process of leaving is beneficial as it removes the uncertainty around when the withdrawal was going to start, according to Mark Lawrinson, regional sales director of Portico London estate agents.
But he also pointed out that economic uncertainty is likely to continue as we still don’t know what Brexit actually means. ‘I think we will see a continued slowdown or lethargic London market when it comes to sales volumes, and as we reported toward the end of last year, transaction volumes across London are already more than half of what they were before the 2008 crash,’ he explained.
‘London has a significant part to play in businesses who trade and operate across Europe and the world, and a buoyant property market relies on the UK’s economic health. If Brexit negotiations go well this could cause further price growth as the economy grows. But if a good deal isn’t reached then the international companies who operate here or look to relocate here might change their minds, reducing the number of residents who live in the capital and again further reducing the transaction levels, which could ultimately lead to price decreases,’ he pointed out.
However, Portico’s managing director Robert Nichols, added that as the negotiations progress there is likely to be stability into the housing market as people realise that the effects of Brexit are not catastrophic. ‘We’ll hopefully see transaction levels increase as a result, which are currently dangerously low and affecting price growth across the capital,’ he said.
He also pointed out that if the Pound weakens this could fuel demand from overseas buyers and investors and the Bank of England could be hesitant to increase their interest rates and this will it will remain cheaper than ever to borrow and get on to the property ladder,’ he concluded.