12 Dec 2016
Author: Stephen Breen
Prior to the Referendum, plenty of credible experts forecast that a Brexit vote would send house prices plummeting. The Treasury estimated a drop of 10-20%, while research house Bernstein said that a decision to leave the EU would “kill Britain’s property prices”, slashing up to 30% off house values. Other experts said the property market would be “turned upside down” if the UK were to vote Leave.
These stark predictions have not become a reality to date, however – with house prices rising rather than falling at a steady pace.
According to Britain’s biggest mortgage lender the Halifax, house prices rose at an annual rate of 6% in November to an average of £218,000, up from 5.2% in October. In the Capital, the average house price is now £500,00 and rising.
The major housebuilders, who saw a drop of up to 40% in their share prices within two days of the Referendum decision, have mostly recovered those losses.
So how has the Property market managed to hold its own, despite the grave predictions? Firstly, the economy has performed better than expected. People feared that many companies would slash their workforce following the Brexit vote, resulting in job losses. Job security plays a huge part in the decision whether or not to move house. But contrary to those predictions, unemployment since June has been at an 11 year low and has remained steady.
The housing market has also benefited from lenders continuing to offer low mortgage rates which again has been unexpected. It was thought that the lack of certainty might result in lenders withdrawing many of the attractive offers on the market, but this has not been the case. The Bank of England cut the base rate to 0.25% after the Referendum and lenders have passed on this saving to borrowers.
Analysts are, however, less sure what will happen in the coming months and years, particularly now the Prime Minister has decided to trigger Article 50 in March 2017.
Countrywide, Britain’s largest estate agent, forecasts a 1% drop in house prices for 2017, with peoples’ concern increasing over their jobs and income once inflation rises. Savills estimates that house prices will remain flat in 2017, with buyers less keen to increase their borrowing.
Other analysts believe that the impact will be different in London from the rest of the UK. According to Knight Frank, the house prices in London will fall by 1% in 2017, but the UK as a whole will see a rise of 1%. Estate agents in London have already reported a slowdown in prices, thanks to the increased stamp duty for both houses over £937,500 (since Dec 2014) and for second homes, less interest in buy-to-let and affordability issues.
The properties at the top end of London’s housing market also deserve separate consideration. Prices at this level have been falling since the close of 2014, due to a combination of factors – the stamp duty rises and the uncertainty of the referendum being amongst them.
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