Whether you’re a avid remainer or avid Brexiteer, there’s no denying that the uncertainty around when the UK will leave the EU, and the terms under which it may happen, is causing property market jitters.
Last night MPs voted against leaving the EU without a deal at any point and under any circumstances. This followed a separate vote on Tuesday in which Theresa May’s proposed Brexit deal was also rejected.
A further vote will be held tonight (Thursday) on whether the Brexit deadline (article 50) should be postponed, which is widely expected to result in Brexit being pushed back until the end of June at the earliest – if the EU agrees to let this happen.
What might a no-deal Brexit mean for house prices?
While MPs have voted against the UK leaving the EU without a deal, the result is not legally binding. A no-deal Brexit remains the default position if an agreement cannot be reached between the UK and EU.
Many business leaders and financial experts have expressed concerns about the potential consequences of leaving without a deal.
In September 2018, Bank of England governor Mark Carney warned that leaving the EU without a deal could send house prices tumbling by a third, and in February this year he added that UK growth would be ‘guaranteed’ to fall in the event of a no-deal Brexit.
House prices did stagnate for a while following the referendum in June 2016.
This could well have been down to the usual pattern of prices growing in spring and plateauing over summer, which we also saw in 2017. But, with Brexit looming ever closer, house prices suffered a bigger post-summer dip than usual in 2018, dropping from a peak of £232,797 in August to £230,630 in November.
The latest ONS House Price Index shows that they crept up slightly in December, meaning that the current average UK house price is £230,776.
Are UK house prices falling?
Looking at year-on-year house price change over the longer term can be another useful way of understanding what the market’s doing.
The chart below shows what the rate of growth has been each
June since 2014, and we’ve added a figure for December 2018 (the latest month
available from the ONS) so you can see the most up-to-date info too
The rate of house price growth plummeted in the year after the referendum everywhere in the UK except Scotland.
It has continued to decrease in England ever since, and Scotland also dipped back down to only moderate growth of 2.39% in December. However, there was more significant growth in Wales (5.24%) and Northern Ireland (5.45%). It’s worth bearing in mind that, even if the rate of growth has decreased, house prices themselves haven’t – and many argue that the slowdown in England is simply a long-overdue market correction.
Transaction volumes since the referendum
Another way of judging the health of the housing market is to look at transaction volumes, meaning the number of property sales in any given month. A lower number of sales can indicate market uncertainty, which is often triggered by events such as an election or a referendum.
As you’ll see in the graph below, the referendum didn’t seem to have much of an impact on transaction figures.
The big spike you can see was caused by the April 2016 introduction of a 3% stamp duty surcharge for buy-to-let investors and people buying second homes, with thousands rushing to buy just before the change came in.
After the April transaction crash, numbers slowly crept up again. According to HMRC’s most recent seasonally adjusted figures, there were actually more house sales in January 2019 – 101,170 to be exact – than in the same month the year before (99,830).
What’s the pre-Brexit market like for sellers?
Two commonly used measures of how the market is performing for sellers are stock per branch – which is the average amount of properties on each estate agency’s books – and time to sell.
The chart below shows that the time to sell has gone up both month-on-month and year-on-year recently. In January, the average time for a property to go under offer shot up to 77 days, the highest it’s been in years – and this could be partly due to nervousness around buying a home in the run-up to Brexit.
Stock per branch was also up year-on-year, from 42 in January 2018 to 45 in January 2019.
As it stands, the only thing that’s clear is that nothing is clear, and you’d be justified in having no idea whether now is the right time to buy, move, invest or remortgage.