The ultimate effects of Brexit on house prices and mortgages will depend on the final details of any deal and their repercussions for the economy. Negotiations about future relations between the UK and the EU are taking place now. If all goes to plan this deal could be given the go-ahead by both sides in time for 29 March 2019. So there is still uncertainty for now; the question is – when will the deal be finalised and once it is, what will the economic consequences be? This will take time to fully understand.
The main considerations to focus on when deciding whether or not to buy a house after Brexit are:
- Post Brexit there may be price reductions and so better ‘deals’ to be had
- Still low rates of interest on mortgages
Should you buy a house after Brexit
There was a slight pause following the surprise referendum result in 2016, but aside from this, the UK’s housing market has thus far been little affected by the vote to leave the EU. The long-term effects of Brexit will depend heavily on patterns of migration from continental Europe. Measures to try to ensure that the housing market remains robust, such as the Government’s Help to Buy scheme, have been put in place to bolster new-build home transactions.
Peaks and troughs
Property market heat is increasing in UK cities such as Manchester and Liverpool, but it is stable or decreasing in Aberdeen and parts of London. London was the fastest growing region only as far back as 2016. As a result the demand for property was high, as were property prices. But this growth rate has decreased since and this decrease is thought to have been driven by people in their 30s and early 40s with young children deciding to pack up and leave.
London is one of the UK regions which have seen high levels of immigration in recent years. In June 2017, net outward migration from London reached 106,608, with 229,405 individuals arriving from other parts of the UK, and 336,013 leaving for other UK areas. Areas of the capital that experienced outflows include Newham, Brent, Ealing, Haringey and Redbridge.
The question we ought to ask is: is this purely a result of political change or is it the forced reaction of young families unable to afford the rapidly increasing property prices? Indeed, London property prices have been blamed by many for the record exodus. Or perhaps it merely reflects lifestyle choices? One possible explanation is that many parents with young children choose to move out of London. Whichever of these two reasons it is (assuming it is unrelated to Brexit), will we then see a different pattern amongst the next generation of Londoners?
Brexit for landlords: property prices after brexit
There is no doubt that property markets are always changing and this is often related to changes in supply and demand. Plus, word of mouth, luck and individual situation can also play a part in a lucrative sale. So whatever the situation now, it will not remain that way forever. You can read about new tools to research the current market climate in your area in our recent post weighing up the current market.
A weakening currency, a stronger market?
Brexit uncertainty has reduced some demand from EU buyers but a weakening currency could also make UK property look more attractive to overseas buyers. Some believe today’s uncertain market offers precisely the conditions in which canny purchasers can find opportunities to strike a property bargain. Post Brexit there may be price reductions and so better ‘deals’ to be had.
The human factor
When commenting on the housing market, Ed Mead (FRICS) has commented on the observed shift from property being a home to it being an investment. “In my lifetime, it’s gone from being a home to being an investment. The Brits have a macho problem with property prices.”
Buying a home is about finding the people who are serious about selling. In reality, the decisions of many house sellers are driven by changes in personal circumstances such as births, divorces, deaths, marriages, etc. As we said in our previous article – even in a cold seller’s market, there are almost always buyers out there. People may accept a reduction on selling price, simply to get on with their life.
In a cold market, buyers fear paying too much because the next one could be less but what they do have is choice. They can buy now or wait. Homebuyers are always happier in a cold market because they buy a property they actually want. When the market is hot buyers have no choice they have to buy the next property that becomes available as the one after that is likely to go for even more money.
Opportunities for the savvy
If you’re buying property primarily as a home rather than an investment then the economic uncertainty surrounding the Brexit negotiations should not be of significant concern to you. Although London prices may not be skyrocketing as they once were, moving home now could be a wise move. Many people sell because they are looking to buy something bigger. Say you’ve got a £1m house that’s now worth £850,000. No matter because the chances are that your dream home has also reduced in cost, perhaps from £3m three years ago to £2.25m. It’s all relative.
What about mortgages?
A silver lining of the Brexit process is that the uncertainty surrounding it has helped to keep mortgage rates low. After the referendum vote, the Bank of England cut rates to a record low of 0.25 per cent. This was part of a package of measures designed to avoid recession. But depending what happens following Brexit, rates might instead rise to curb inflation.
James Anderson’s friendly team of experts have helped thousands of Londoners to successfully buy, sell, let and rent their homes and properties in South West London. If you’re not ready to leave the capital, visit us at one of our three branches.