House Prices After Brexit

House prices after Brexit

28 Apr 2020

Globally property markets continue to change and evolve. The departure of Britain from the EU has been giving mixed messages to the buyers and sellers. The average asking price of the properties in the market was down by 0.2%, just before the conclusion of Brexit and it was one of the first fall experienced by the market since 2010.

Less than a month before the fall, the market experienced pre-Brexit buying spree where the sales were up 6.1% y-o-y. After the re-election, uncertainty has been affecting Brexit house prices. A recent survey conducted by the property buying firm found 75% of the Britons overrate the impact of Brexit. 

Last year many business leaders and financial experts showed their concerns about the potential consequences of exiting without a deal. In July 2019, the ONS reports claimed that a no-deal situation can result in fall in prices by almost 10% by mid-2021.

But some property analysts believe the market is stable and lower numbers of sales are, mainly, due to the uncertainty created during the elections and the referendum, not the weakness. 

Will house prices drop after Brexit?

  • In the last year, house prices grew incredibly slowly due to political and economic uncertainty that restricted growth. Overall, the home prices rose by just 1 per cent in England. There were some areas of growth in other parts of the UK, but overall the picture was grim.  
  • Experts believe the cost of renting can further increase in the post-Brexit phase at a higher rate because there are fewer letting properties available. 
  • The number of homes on sale is low as compared to previous years and the first time buyer may have to struggle to get the preferred type of home. 
  • If the house prices UK after Brexit increases, many will find it difficult to save enough for the deposits. Currently, the schemes like Lifetime ISA are helping buyers afford the deposits. Nonetheless, it is expected the prices can increase but at modest rates. 
  • There are other issues influencing the current market. The impact of pandemic Covid2020 and the weakening pound rates can actually make the property market attractive to overseas investors seeking to buy in safe regions, nevertheless, a lot depends on the current property trends where the owners should be ready to sell. 
  • If the pandemic situation comes to an end and the market stabilizes, most sellers and buyers will jump in to enhance the overall market confidence. Even in such conditions, the first time buyer may take time to see how far the prices rise before coming to a final decision.
  • So the influx in new home listing on the property sites may come after a few months of resolution of the pandemic and the stabilization of the economy.  
Natex, Liverpool


What will happen to house prices after Brexit?

Before Brexit, many home hunters were looking to complete their pre-Brexit deals and there were some who were unsure and did not take steps to buy or sell. Brexit took more than three years to become a reality.

So, how will Brexit affect house prices? After the intense drama, UK left EU on 31 January and the homeowners expected the ambiguity created by Brexit to diminish and the economy to recover in the coming months, while, the trade deal between EU and UK is under negotiation. 

In general, Brexit had a profound impact on the economy and it widely lowered consumer confidence in the property market. The housing market, finance and future planning in schemes like buy-to-let or renovation, are now unpredictable. The home buyer is unable to find guidelines to prepare for the outcomes. Additionally, the market has been negatively influenced by Covid2020 pandemic.

After the referendum was implemented, no big change in the UK house price was observed. In September 2018, the Bank of England governor made the prediction of the catastrophic decline in property prices post-Brexit. He predicted growth in unemployment and soar in prices but experts found the impact was less dramatic than predicted. 

For most of the year 2019, the house price declined in the capital city and the South East of England. The December data of ONS found the prices increased in December by 2.3% in London as compared to the last year and in the South East, the rate increased by 1.2%. It shows the prices grew across all regions since February 2018. 

Will Brexit affect house prices?

The rates continue to grow at a slower rate and the land registry data find the prices actually increased at a faster rate in August 2016 than in July before the start of the referendum.

Despite the slowdown due to stamp duty of 3% on second homes and buy-to-lets, there were fewer transactions. The demand and supply remained steady amidst uncertainties related to the referendum.

The Nationwide Index found the price increased faster as compared to August 2016 than in July, which indicates the impact of the referendum on modifying the trends was delayed. 

Overall the indexes show house prices grew slowly than before in the South and the East of England in the last year. The prices rose in the other parts of the country but the market is expected to be influenced positively by the elections, employment conditions and an attractive mortgage rate. 

Now the UK has left the EU and is in a transition period and there is no trade deal with the EU. This can have a strong impact on the economy as the goods & services may become expensive due to the increase in transit and labour cost.

Property experts notice the price increased with the growth in buyers’ post-elections but there exists a shortage of available properties. Only motivated sellers are selling their properties in the post Brexit phase. Many property owners held back with the hope of an increase in price. 

The sellers who invested in properties in 2014 are the ones who may wait and hold their property, because at this time they may not realize the amount they paid to buy the property. 

There were other causes for the stagnation and shortage of new properties in the market. The current exchange rate is expected to improve. Many overseas investors are waiting to get a favourable exchange rate.

The developers are not constructing new homes as they are waiting for the market to get stronger to launch new homes. 

These trends can be a short term where once the supply increases, the prices will decline. 

House prices after Brexit 2019

Certain events related to Brexit can reduce the number of transaction for a short duration like for a day or a week, but the overall trend is governed mostly by demand, supply, and price.   

Mortgage market - The mortgage lenders find there is not much impact on the mortgage market. The BoE base rate fell to 0.25% after the referendum and now it is up to 0.75% that is still very low. The direction of the base rate is difficult to predict as it could go either way any moment. Nonetheless, the mortgage market remains extremely competitive and the rates provide the borrowers with a chance to lock their mortgage down with an extremely low fixed rate. 

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In the current situation, the fixed-rate residential mortgage for two years is less than 1.25% and there are many other deals under 2% where the lowest rates are below 1.5%. The market is now highly competitive and if you want to borrow for a higher proportion of the property, lenders are ready to give mortgage under the Help-to-Buy scheme. 

House price predictions post Brexit and impact on home renovation - The value of the pound fell dramatically after the EU referendum and resulted in an increase in the cost of goods coming from the EU. It also increased the price of building material and the cost of renovation work.

The value of the pound is nowhere near the pre-referendum levels. Government figures (2018) find 7 per cent of the workers in the construction industry came from the EU and about 28% of the workers in London were from the EU. With the increase in the cost of hiring, the number of workers has fallen.

Despite Brexit delays, homeowners invested in renovations and an increase in self-built projects by 14 %( in October 2019 as compared to October 2018) can be seen. 

The impact of Covid2020 pandemic led to a decline in price by 3% in the year, which can rebound but the Knight Frank report finds home sales will collapse over Covid2020 pandemic. 

The report released by Knight Frank states the prices will decline in the current year and then grow by 5% in the next year. 

What will happen to property prices after Brexit?

The actual impact of Brexit is completely unknown. A professional mortgage advisor may not be able to provide an accurate answer to it as it involves a lot of uncertainty. There has been a drop house prices UK after Brexit but this may provide an opportunity for the buyer to get a good deal. 

Besides, such investment is considered long term option and a short term decline in rate may not lead to long term outcome. It is believed the prices will stabilize in future. 

Actually, investment in property requires long-term holding and those who invested for over a decade are most benefited. 

Many UK based buyers overseas are attracted to the current exchange rate and they expect to buy now, to benefit from attractive currency rates.

Other factors influencing the market are the new build homes in London and the decline in demand for the buy-to-let. 

The increase in stamp duty for the second homes and the buy-to-lets has restricted profits in investments where one may not be able to gain any tax relief. Further, the benefit of paying less tax may be completely replaced by the basic rate tax relief in the subsequent years. 

The housing market was strong in the month of January and February. Growth in sales and price growth was seen across the country where even the prime central London market had a reversal of 5 years price decline. 

Nevertheless, the impact of the corona-virus is expected to be very strong where the economic activities will decline in the first half of the year. The country will face dislocation of job markets and weakening of consumer sentiments. 

How will Brexit affect house prices?

There are some other changes that have affected the housing markets. The tighter lending criteria have created portfolio landlords with the ones having four or more mortgaged properties. This scheme was introduced in September 2017.

Some property owners want to avoid taxation and legislation issues and they have already traded their investment. Some owners face problems related to the management of the assets. 

There are a few buy-to-let landlords entering the markets who get many requests to manage the assets that allow them to protect the property and manage in a cost-effective manner. 

Trends in some regions show the number of landlords entering and leaving the markets is almost the same, and many buyers and sellers are least affected by the sentiments or practicalities of Brexit. Such homeowners are worried about the yield, taxation and other legalities. 

The market has been attractive for the first-time buyer because the competition with buy-to-let buyers is relatively less in comparison to previous years. 

Due to Brexit, delays in political decision making, slow reaction of sellers and covid2020, the market may slow down. The Knight Frank report on Brexit effect on house prices

  • Activities will decrease across the economy. There could a loss of £7.9bn in DIY and renovation spend. 
  • There will be a wider economic impact like loss of employment and general mobility. The drop in economic activities will have a huge impact on the government’s revenue and it will face a loss of stamp duty of value £4.4bn and a loss of VAT by min. £1.6bn. 
  • Overall the country will suffer from a significant decline in business tax and personal revenues. 
  • This will reduce the overall mortgage activities where one can see a sharp decline in mortgage lending. The lenders will issue at least 350K fewer mortgages for home buying. Most lenders are eager to do business, especially, with the two rate cuts.

Property experts want the government to take actions to enhance landlord confidence and stave off a crisis in the private rented sector. 

Should I buy a house after Brexit?

People across the world continue to move due to changes in personal circumstances, where they grow up professionally and then marry, which creates a need to buy a house. There are many who are joined by those who desperately need to spend on the house due to personal circumstances. 

There are many advantages of investing in a slow-moving market where low-cost financing options serve as an additional incentive. This provides the methods to local properties without missing out another chance. 

Will Brexit affect house prices?

  • The key concern of the buyer is to get the opportunity to own the property of your choice, which means, it should be located in the desired place, street or close to required amenities. The current phase of slow-moving property price can offer the opportunity to finalize deals in the desired manner without worrying about the fluctuation of rates.  
  • Mortgage rates right now are low and many would want to get fix rate mortgage but one can look and compare the alternative options to get the best. 
  • The current post-Brexit market offers a number of options to the first time buyer to get onto the property ladder without much competition. 
  • The time provides added benefits where one can get an exemption from paying the stamp duty, in conditions, where the property prices are below the threshold of £300K. There are some buyers who are sellers as well. They can sell a lower value property to invest in a more expensive option, at a bargain price. 
  • Some of the good locations have started getting a short-term rise in price in the post Brexit phase but the supply remains low. 
  • It is best advised to seek guidance from experts before finalizing a property deal. 
  • Most reports provide averages, and they may not provide a clear picture of the market condition.  

Will house prices rise after Brexit?

Landlords heavily depend on external financing may find the uncertainty of the phase troubling. These trends will impact the prices and in the limited time-space of crisis, the decline can be limited. In the post Brexit phase, the change in immigration policy can reduce demand from those coming to the country. 

Last year property buyer underwent a number of flurry activities where things were slow but the buyers got attractive prices to invest and the sellers were reassured of the buyer’s commitment. The significantly lower rates and high employment lowered the chance of buyers’ pulling out from the agreed deal.  

House price predictions post Brexit finds the house prices UK after Brexit may pick up after a few months and this will provide adequate time for the buyers and seller to look into the available opportunities. 

Will house prices rise 2020?

Some expert’ studied Brexit effect on house prices  and their house price predictions post Brexit finds if the market supports  and if the problem of Covid2020 is resolved, the growth in property rate can be more than the rate seen in the last 18 months. 

Knight Frank recommends a five-point plan to bolster and spur such growth. 

  • Although the government will be giving up stamp duty revenue in the year, it seems clear that there is a need for a stamp duty holiday to be given during the post lockdown phase.
  • Help- to-buy scheme provides a lot of support to the house building sector. It gives confidence to progress when the market is slow-moving. To enhance efficiency the process of conveyancing and Land Registry searches could be improved.
  • Without the supply-side support, the demand may not pick up. The government needs to take initiatives to implement the pending planning permissions to get rid of the barriers hindering the developers on site. Knight Frank recommends to the government to provide flexibility around planning obligations. 


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