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Brexit: What does it mean for the UK property market?

17.01.19

The two and a half year Brexit saga has started to reach the home stretch this week following Theresa May’s crushing defeat in Tuesday’s ‘meaningful vote’. The Tory leader suffered the heaviest Parliamentary defeat of any British prime minister in the democratic era after MPs rejected her Brexit deal by a staggering majority of 230.

Opponent and Labour leader, Jeremy Corbyn instantly pounced on the wounded May, officially tabling a vote of no confidence towards her government.

With support from her Tory MPs and the DUP, May narrowly survived the vote of no confidence, but the slight margin of victory has once again weakened her position.

There is now increased pressure on Labour and a reluctant Jeremy Corbyn to support a second referendum. It’s also believed that in response to the ‘meaningful vote’ results, Conservative MP Dominic Grieve will present two bills to the House which call for a people’s vote.

The jury is still out whether or not the UK property market is in a good position following the recent Brexit developments, with the pound surprisingly strengthening following Tuesday’s result. We investigated to see what the experts are saying.

London and the south east

London and the southeast traditionally has the highest property prices in the country, that’s still the case, but the market is appearing to stagnate with the uncertainty around Brexit. Buyers in London seem more preoccupied with Brexit than elsewhere, this is fairly unsurprising as most of the capital voted to remain in the EU, meaning that Londoners are naturally more concerned with the current uncertainty and likelihood of the UK leaving the Union.

This is reflected in the house price drop in the capital which sees a price fall of 0.7% over the year to November, unchanged from the previous month. London house prices have been falling over the year each month since July 2018, while potential buyers and sellers have been postponing transactions in the south of England until after the EU withdrawal.

A conservative forecast has also suggested that rental growth in the capital is now 2.84% lower than expected back in June 2016. This, though, could be as high as 4.15%. The London property market, which has arguably suffered the most from Brexit uncertainty, witnessed average annual rental growth fall from 1.26% in June 2016 to a low of -0.33% in June 2017, before starting a slow recovery in February 2018 (up to 0.05%). By December 2018, it had reached 0.58%.

Working on the basis of the higher estimate, this would leave the average London landlord £1,806 short in rent due to muted rental prices. Even under conservative estimates, the average London landlord could be £1,217 worse off as a result of the vote to leave the EU.

Elsewhere

While there is still plenty of uncertainty all over the UK, some areas of the country are still leading the way with very strong growth seemingly against the odds.

The latest House Pricing Index (HIP) showed that UK property prices have risen by 2.8% over a year. Prices in England grew by 2.6%, taking the average property value to £247,430, and data shows the West Midlands saw the greatest price rise of 4.6%, followed by the South West, up 4.3%, and the North East, up 4%.

Things have looked brighter across the border to Wales too, where property prices are on the up, rising by 0.2% since October and 5.5% over the year, taking the average property price to £161,499.

Property expert and author of Property Uncovered, Louisa Fletcher, has suggested that the price rise in these locations is due to them being ‘Leave’ areas.

“Looking at areas where there was a strong vote towards ‘Leave’, for example the North West, Yorkshire and the Humber, the Midlands and East Anglia, sentiment has obviously been confident as a result of the referendum, therefore markets have flourished over the last couple of years as a consequence,” Louisa said.

“In these areas, the number of properties sold and values have remained consistent, if not in some cases, seen marked increases.”

This theory isn’t catchall however, as ardent remainers Scotland have also experienced a good increase that saw house prices increase by 2.9% over the last 12 months.

The UK following the ‘meaningful vote’

Figures have shown price growth fluctuations that change heavily depending on the location, but the uncertainty over Brexit has meant that the market itself has become uncertain, with many experts saying they do not know what to expect.

North London estate agent Jeremy Leaf says: “On the one hand, the risk of uncertainty for the property market increases after yesterday’s vote but on the other, it helps to concentrate minds on all sides as the threat of a ’no deal’ rises, which was reflected in Sterling strengthening immediately after the result was announced.

“Most buyers and sellers tell us that a ’no deal’ Brexit will lead to greater property market uncertainty. A ‘hard’ Brexit could prompt more investor interest from abroad although owner-occupiers might be reluctant to commit until Visa rights are clarified.”

“Buyers in London and the South East seem more pre-occupied with Brexit than those elsewhere in the country. Where sales are agreed in the current price-sensitive market, discounts need to reflect buyers’ perceived risk of a possible market downturn,” he says.

Yomdel chief executive Andy Soloman comments: “The last thing the current property landscape required was yet more uncertainty but unfortunately that is what has been delivered following the events of last night.

“This ongoing instability will no doubt be detrimental as more UK buyers and sellers continue to refrain from entering the fray and it certainly looks like things will get worse before they get better.

“While the market remains fairly resilient considering, a further slow in the rate of price growth is likely and we will no doubt see mortgage approvals and transactions continue to decline as buyers demand falls and the number of sales completing follows suit.”

Some in the industry are more positive on the markets outlook than others, but it’s clear that opinions on what will actually happen regarding Brexit continue to differ.

Just Mortgages and Spicerhaart operations manager John Phillips says: “Last night’s historic defeat shows that despite two years of negotiations we are no further on than we were after the Brexit vote. Brexit has split the country, but one thing most people are agreed on is that our MPs have let us down and we are in danger of switching off completely about the whole issue.

“But I refuse to be all doom and gloom about it because negative predictions can be damaging, and I genuinely don’t think Brexit will be the disaster everyone says it will. The UK business market is resilient and always finds a solution to whatever is thrown at it and once we are past March 29, whether we have a deal or not, I think things will start to improve because some of that uncertainty will be removed, giving people a better idea of what the future holds.”

Glenhawk chief executive Guy Harrington says: “This outcome is certainly better than the deal that was on offer, that’s for sure. The sooner it is taken off the table, the better. Hopefully any further negotiations with the EU will now be delayed, and ultimately Brexit cancelled.”

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