Whilst leaving the EU without a deal would increase the chances of the economy falling into recession, house prices have never fallen by a third at any point over the last fifty years. During the last financial crash of 2008 prices fell less than 15% and recovered in a little more than three years. A Brexit deal will undoubtedly be less damaging in the short term than a no deal scenario, but history would indicate that it is hard to imagine house prices falling by the degree that the Bank of England’s director has suggested.
I don’t see why a no deal Brexit would cause a sudden, significant price correction in the UK property market. There would inevitably be some concern over the uncertainty this would create which might have a downward impact on housing transactions, but this does not equate to price falls as sellers, supported by low interest rates, will simply hold off rather than sell at any meaningful discount. In any event, I think this has already happened to a certain degree, so we may even have already plateaued.
I think that historically low interest rates and the availability of funding have helped the UK market ride out the storm thus far. Whilst some have said the market has stagnated I don’t think we are seeing many bargains. Whilst some high street and institutional funders have thrown the baby out with the bathwater and curtailed some lending the specialist finance market has stepped up to the challenge again and provided accessible, flexible, cost-effective finance solutions. This has meant that few people have been in a position where they are forced to sell.
I also don’t think this slowdown is entirely Brexit related either. There have been rapid increases in stamp duty in recent years which has been a factor acting as a drag on activity and pricing along with other fiscal policies implemented which has forced some buyers to change their strategy.
My view is that the biggest impact of Brexit could well be on developers with an increase in the cost of materials and the availability of skilled labour from European countries. That said we have hundreds of new homes we need to build.
Post-Brexit the pound will likely devalue further and it could well encourage some momentum from international purchasers believing it would be a low point in the market and make an international purchase for UK-based buyers more expensive possibly channelling these funds back into our home market which will act as a catalyst for growth.
Fear of the unknown led by government indecision is likely to have a bigger impact on the market rather than Brexit itself and I think we will see the market improve quickly when we see an end to the wider political uncertainty we are currently experiencing.