Keywest Estate Agents / Mar 08

Post Brexit House Prices Predicted to Fall, UK Property Experts Suggest


As Britain’s obsession with the property market continues, so does the uncertainty surrounding Britain’s exit from the EU.

But now, the one thing we all feared is almost here, and that’s a no-deal Brexit. What we are all waiting nervously to find out is post Brexit house prices, will they fall?

Britain is officially set to leave the EU on the 29th March 2019, and it has caused the housing market to practically come to a standstill. Falling demand, lack of buyers, record time to complete sales, record low numbers of properties on the market.

These are just some of the trends we were already seeing take effect, even before a no-deal Brexit.

If British Prime Minister Theresa May struck a deal, we would have remained subject to EU rules and we wouldn’t see any changes until December 2020.

This would have given the government a transitional period with extra time to negotiate new trade deals, and businesses would have had more time to prepare before the changes take place.

The majority of experts post-Brexit housing market predictions seem to all point in the same general direction, and that, unfortunately, is down.

Nobody knows how much property prices will actually fall yet, predictions range from a market standstill to an all-out crash.

But there are very few experts predicting a rise in the market, which cannot be a good sign.

Post Brexit House Prices Could Drop by 35%

UK House price predictions are not looking good I’m afraid. Bank of England’s Governor Mark Carney said in September that… ‘prices would crash by a third in a no-deal Brexit’. But it’s important to note that this was not a forecast of what he believes will happen when Britain leave the EU without a deal.

The Bank of England regularly conducts what they call ‘stress tests’ to see if the economy would survive any financial shocks.

A post Brexit market crash was said to be what could occur in the worst case scenario. The good news is the tests conducted showed that the banking system would survive any major disasters, however unlikely.

Other reports suggest that Mark Carney attended a meeting in Downing Street where he is reported to have warned of what could happen in a no-deal Brexit EU exit… falling pound, increased mortgage rates, high inflation, and many homeowners finding themselves suddenly in negative equity, are just some of the things he mentioned.

Standard & Poor’s Warn of Recession

Ratings agency S&P has warned of a prolonged recession lasting as long as the aftermath of the 2008 financial crisis. They say a no-deal Brexit will cause a 1.2% dip in the economy in 2019 and a further 1.5% in 2020.

Standard & Poor’s also predicted unemployment would rise from 4% to 7%, inflation up to 4.7%, and a 10% drop in the housing market over the coming 2 years. They also said that household incomes will decrease by £2,700 a year and London office prices could fall by 20%.

These predictions were made back in September when S&P began warning investors of the potential dangers posed to them by a no-deal Brexit. They stated they still believed a deal would be made but the possibility of a no-deal was now enough to become a concerning factor.

London see First Annual Fall in House Prices in 10 Years

Early last year it was reported that London property market is falling at the fastest rate since 2011. The capital also recorded the first annual fall in prices since 2009. In fact, in February a 1% drop was recorded from a year earlier.

When you compare that to data from August 2016, when annual growth was as high as 20.6%, you can start to understand what all the panic is about.

Talk of a post-Brexit market price crash has caused a decline in international foreign investors, which has been a major contributor to the price drop in the capital. And many believe London’s housing market problems may just be beginning.

Most buyers are now firmly priced out of the capital’s market, despite recent cuts on price tags across the city.

The average house price in London is now £486,000, far higher than anywhere else in the UK.

Online property giants Zoopla, released figures suggesting 39.5% of properties for sale in the capital were reduced in price last September.

Sellers are becoming more realistic about the value of their property in an attempt to attract buyers.

Any price reductions will be welcomed by first-time buyers, as now only a third of people who have a 10% deposit can afford to get on the London property ladder.

In fact, there are now zero homes available on the London housing market for under £100,000.

What About Rent Post Brexit?

Surveys conducted between 2015-16 suggested that up to 25% of rental properties in the UK are occupied by foreign workers. And the University of York reported that in 2016, 18% of new builds in London were sold to foreign buyers.

Losing large numbers of foreign workers and overseas investors will definitely have an impact on the cost of rent in Britain.

The fear amongst landlords is if migrant workers return home there will be an excess of vacant rental properties.

This will drive down the cost of rent and make it harder for landlords to find tenants. Alexandra Morris, managing director of online property giants MakeUrMove said, “With uncertainty about the rights of EU workers if the UK leaves without a deal, areas of the country where landlords provide accommodation to large EU migrant communities could be affected.

“If EU workers return home, there will be a host of empty houses and flats. Landlords will be hit financially if they can’t find new tenants to let the properties. This will have a knock-on effect on rental prices.”

It’s these exact kind of predictions that’s caused the housing market to virtually stand still while everyone waits to see what happens.

Foreign investors, first-time buyers and buy to let investors are taking a wait and see approach before making any large financial commitments.

Who can Benefit from a Post Brexit Housing Crash?

Alexandra Morris, managing director of online letting agent MakeUrMove told The Express…“A fall in the housing market because of a no-deal Brexit may provide some opportunities for property to be bought by first time buyers.”

But she also mentioned… “Many homeowners could find themselves in negative equity, trapping them in properties that aren’t worth as much as their mortgages.”

And whilst a post-Brexit market price crash could provide an opportunity for first-time buyers, this is unlikely to be the case. A crash would likely be accompanied by high unemployment, rising inflation, spiraling mortgage rates, and a squeeze on household incomes.

Since saving for a deposit is by far the biggest challenge faced by first time buyers, an economic crash wouldn’t make things any easier.

Most likely the only people to benefit from a post Brexit market crash would be rich overseas buyers who could take advantage of weak markets and a falling pound.

The Likelihood of a Market Crash Still Remains Low

Most experts agree there is no doubt we are going to see some sort of a negative impact on Britain’s housing market, irrespective of a deal or no deal-brexit.

But a 35% drop for the property market would be far more catastrophic than the crash we saw in the ’90s, when UK house prices dropped by 20%.

And twice as bad as the financial crisis of 2008, when we saw prices fall 18.7% over a 16 month period.

So, I wouldn’t pay too much attention to all the panic over comments made by Bank of England Governor, Mark Carney.

A major financial crisis as a result of a no-deal Brexit is extremely unlikely, and Mark Carney only stated that it was possible under the worst case scenario. Even under this scenario, the Bank of England ‘stress tests’ showed that the UK’s banking system would survive even a catastrophe of this magnitude.

The UK economy and housing market are extremely resilient, and trade will continue despite of house price predictions post Brexit.

Many countries depend on us for trade just as much as we depend on them. The reality is that things probably won’t be as bad as people fear as far as a crash in the economy is concerned.

But the extent of the damage Britain’s EU exit will do to the UK’s housing market remains to be seen.

Theresa May’s Plan B

We saw British Prime minister Theresa May’s plan A obliterated in parliament last week, as her proposed Brexit deal suffered a humiliating defeat. It’s time for plan B to go swiftly into action, but wait a minute…do we have a plan B?

Theresa May has been rather vague on the matter but what is clear is the E.U are unlikely to renegotiate terms. The Prime Minister seems determined to somehow get the withdrawal deal past parliament but this is also extremely unlikely.

The plan B proposal is expected to be debated in parliament on the 29th January with a vote taking place on the very same day.

But most people are bracing themselves for a no-deal E.U exit at the end of March. Exactly what this will mean for the housing market is yet to be seen but it looks like we are about to find out.

Should I Wait Until After Brexit to Buy Property?

This really depends on why you are buying the property in the first place. If you have found the perfect property that you intend to live in for a long time then maybe you should buy now. The market may be slow but if you wait until after Brexit you could lose out on your dream home.

But if you don’t mind the possibility of having to continue your property search, then I would say it’s a good idea to wait. Waiting is the low-risk option and if housing market crashes you may even end up paying much less for your dream home.

For first time buyers and buy to let investors the safest thing to do is to wait and see what happens to UK’s housing market post-Brexit. If Brexit hits the UK housing market hard then investing in property now would be a total disaster and you will lose a lot of money.

Should I Wait Until After Brexit to Sell My Property?

If you were planning on selling and you can sell your property before Brexit then I would say yes you definitely should. The market is at a standstill as people struggle to sell property throughout Britain.

With so many negative forecasts and warnings of a possible but unlikely UK housing market crash, Now you may be thinking of selling your property and moving into rented accommodation out of fear of a post Brexit market crash.

But let’s take a second to assess costs before you make any big decisions. After estate agency fees, legal fees, and the cost of moving you are still not finished.

You must not forget to take into account the extra money you will spend on rent vs your mortgage payments, also the stamp duty you will pay when you buy another property.

After all the expenses you will probably lose around 5% equity, so make sure you account for all the hidden costs before you decide to sell your home.

Post Brexit House Prices - UK Market

Are you currently considering on selling your home? Let us know if you will be selling before or after Brexit in the comments below. And….. don’t forget t mention why.