The B word is emerging again with less than six months until the UK leaves the EU
It is generally agreed that Brexit has not had much of an effect on the British housing market, with the prime central London sector the most prone to this kind of political and economic uncertainty.
But the latest figures and analysis suggests it does indeed exist and property markets are likely to be more subdued in 2019 before bouncing back.
The Brexit impact exists in the prime central London market, with the latest data from Knight Frank showing that sales fell by 9% in the 12 months to August compared to the previous 12 months.
After strengthening earlier this year, the dip in the market highlights how uncertainty surrounding the final stages of Brexit talks are having an impact as we approach B-Day with much talk of exiting under a No Deal scenario.
Tom Bill, head of London residential research at Knight Frank, certainly believes that it is likely to be a short term trend, although he also pointed out that price growth has weakened in recent months due to the uncertainty around Brexit and this has been exacerbated by a growth in supply as more landlords attempt to sell their property following tax changes.
Meanwhile, the latest five year forecast from Savills says that heightened uncertainty around Brexit negotiations will delay recovery in the prime central London housing market for a further year to 18 months but this will be followed by a bounce in 2021.
It points out that London’s highest value markets have more than corrected for the additional sale taxes payable since the stamp duty overhaul in 2014, with price falls totalling 18.4% since the peak earlier that year.
It adds that until Brexit negotiations are complete, the market will remain price sensitive and driven by needs based purchases, the firm says. This will put price growth on pause for the next two years.
Landlords are also concerned about Brexit and HomeLet’s 2018 annual landlord survey says that more than a third have concerns over Brexit’s impact on the market. The issue is that the effect on the economy, and thus rents and prices could push more landlords into leaving the private rented sector.
But there will be a steady group who will keep going, with another landlord survey from Your Move saying that nearly half of all buy to let landlords in the UK are using their property investment as a pension pot.
It also found that 23% of pension pot landlords have been investing in the buy to let sector for over 15 years while 29% of them see their properties as a business, with 53% investing in more than one property.
Pension pot landlords will exit the market when they are ready to do so, both financially and politically. Continued economic uncertainty related to Brexit could delay such a decision, especially if the housing market is on pause for a couple of years.
However, this could just push the problem of landlords leaving the private rented sector a few year’s down the road. It will not prevent landlords leaving, particularly if they decide it is no longer financially worthwhile. The Government is trying to make landlords feel more wanted, they have been described as being an important part of the drive against homelessness, for example, but it is tax that is the biggest issue, and perhaps Chancellor Philip Hammond needs to address this in the Budget next month.