Although the UK has officially left the EU, the full impact of Brexit is yet to be felt. From January 2021, if there’s no trade deal in place, the nation will finally be able to see whether there are any financial consequences from adopting WTO terms.
While there are several industries concerned about the future of trade, what about the average man on the street? Will Brexit have any impact on house prices, and if so, what? Here’s a closer look at what the experts are predicting.
Changes Since the Brexit Vote
Before looking to the future, it’s worth casting an eye over what’s happened so far.
Since the Brexit vote in 2016, house prices have been relatively stagnant. Long periods of plateauing prices and sluggish growth were experienced by most of the market. At the time of the Brexit vote, year-on-year prices were increasing by 8.84% in England, but by June 2019 this had dropped to 0.70%. When factoring in the cost of living, this cancels out all practical growth in the market.
However, things have taken a turn for the better since 2019. In the run-up to the general election in December 2019 prices began to bounce back more robustly, and this has continued in 2020, despite the climate being impacted by other factors.
Part of the reason for the resurgence is that the government announced a temporary increase in the stamp duty threshold, saving home-buyers thousands of pounds. This period is due to come to an end in March 2021. If this scheme isn’t extended, the market response will be a significant indicator of what to expect in the coming months.
At the time of writing, it’s not yet clear whether the UK will be leaving with a trade deal or forced into a No-Deal situation. This decision is likely to impact the housing market and determine whether house prices will fall – and by how much.
If a deal is struck, modest price increases are expected. These rises could be higher if the stamp duty tax break scheme is extended by the government.
If there is no deal, the consensus is that prices could fall between 5.4-7.5%. In some markets, there may even be a total crash, with up to a fifth wiped off the value of property. This is a worst-case scenario and given the resilience that the market has shown in 2020, any drop is not expected to be catastrophic.
There may also be geographical differences. The housing market and prices in London and the south-east have been disproportionately affected compared to cities in the north. This could be due to the greater exposure to EU trade, and the more significant influence than a No-Deal could have. House prices in the capital have been slower to increase in the last two years, and it’s anticipated that they may well take the brunt of any overall slowdown.
There are so many variables, and it’s impossible to be confident about the impact that Brexit will have on house prices, other than to say it’s unlikely to be positive in the short term. The best that home-owners can hope for is a neutral market response while keeping their fingers crossed that in the medium term house prices start to regain some of their former healthy year-on-year growth.