What effect could a no-deal Brexit have on house prices?
No one really wants to think about a no-deal Brexit. However, that’s the scenario that’s currently looking increasingly likely thanks to a failure to reach agreement between the UK government and the EU. In property terms, Brexit has already had a destabilising effect on the market, with uncertainty driving house prices down and buyers increasingly hesitant to purchase. But could a no-deal Brexit make everything worse?
The short answer is yes. The main issue with a no-deal Brexit is the uncertainty that it creates for consumers and for businesses, such as those in the finance sector. Where there is uncertainty people tend to invent worst case scenarios – the end result for businesses is that they may preemptively put costs up to protect themselves. For consumers this often means being unable to make a move.
Spotlight on London
As the most valuable property market in the UK, London is a great place to examine what the broader effect of a no-deal Brexit is likely to be on the wider UK market. Already, London buyers are hesitating when it comes to making offers on new properties. A combination of the increase in interest rates, alongside high inflation and a range of increased costs making household budgets more difficult to manage, have put a stop to the risks that buyers might have taken with making an offer five years ago.
In London, where the buoyancy of the market is particularly dependent on overseas buyers, there are also concerns about large numbers of international investors being shut out. As it’s not clear what will happen after Brexit with respect to foreigners buying in the UK, demand has significantly slowed.
The rest of the UK
Already, Nationwide has revealed that its house prices fell by 0.5% in August across the UK. That may not sound like a particularly significant figure but it is actually the biggest monthly drop since July 2012. Another seemingly small number was the Bank of England’s recent interest rate rise, which took the Bank of England Base Rate to 0.75%. The reality of this rate rise in mortgage terms would be to add on an extra £30 a month to the average £250,000 variable rate mortgage in London. Although by itself such an increase might not be enough to put buyers off, if combined with other rises in household expenses it could have a deterrent effect.
A chaotic exit = the worse case scenario for everyone
Uncertainty is the major underlying force driving every negative associated with Brexit, from the drop in the value of the pound to the reticence of buyers to jump into the market. However, it’s the one thing that everyone now has to face up to as the prospect of a no-deal Brexit looms. As with any property market, there are advantages now for the right kind of buyer and if you’re looking for a great deal on a property there are lots to be found. The key is to make sure that you’re ready to move quickly and that you work with the right agent to find the perfect place.
Get in touch with Clarke Gammon Wellers for help selling your property or buying today.