House Prices Continue To Defy Brexit Expectations
It doesn’t matter what your political persuasions are – if you’re a homeowner, property investor or thinking about buying for the first time, chances are you’re eager to find out how Brexit will impact on the market. The Monetary Policy Committee recently voted to keep the base rate at 0.75% whilst Brexit-related uncertainty continues.
Data recently released by Nationwide said only asking prices in London and the South East have been dropping throughout autumn 2018, with Chief Economist Robert Gardner saying annual growth remained stable in September, at 2%. Even in London, the decline seems to be modest, standing at a mere 0.7% and remaining just 3% below the record high of Q1 2017 and over double 2007 levels. Yorkshire and Humberside was the UK’s best performing region, seeing values increase 5.8% year-on-year. The East Midlands wasn’t far behind, with a rise of 4.8%. Wales and Scotland had increases of 3.3% and 3.1% in Q3, with Northern Ireland reaching 4.3%.
“A fairly steady market”
London estate agent Jeremy Leaf described the figures as “good news”, saying they represented a “fairly steady market”. The figures came as a surprise to many after house prices suffered the biggest fall in six years in August 2018. Stock shortages and low mortgage rates were offering considerable support to the market, with many purchasing properties following their summer holidays.
House prices since the referendum
House prices growth initially slowed down after the 2016 referendum, with BoE governor saying Brexit could slash a third off prices shortly after. Traditionally, growth has always slowed during the post-summer period, though the drop was greater than normal in 2018. Scotland performed better than the other UK nations during the year following the referendum, and there has been considerable growth on Wales and Northern Ireland during the past two-and-a-half years too.
Have house prices really fallen?
Despite decreasing levels of growth, actual house prices haven’t fallen substantially. Falls in value are being interpreted by some as a merely an inevitable market correction following a boom. The market may also seem healthier if we look at transaction figures. According to Which?, the referendum did not cause a sizeable fall in transaction numbers. There was a considerable rise in transactions in early 2016 due to the new 3% stamp duty surcharge for second-home buyers and buy-to-let investors, which resulted in vast numbers of individuals acting quickly in order to beat the change. Following the inevitable crash, transaction numbers slowly began to rise again.
How long are homes taking to sell?
Figures from HMRC tell us there were more sales in December 2018 than the previous December, with 102,330 houses changing hands compared to 98,760. When experts assess the performance of the property market, they often look at how long properties take to sell and how many homes are on the books of estate agents. Rightmove announced in December that properties were taking 70 days to receive offers compared to 67 the year before, with branches having 46 homes on their books as opposed to 43.
“Avoid rash decisions”
Which? Mortgage Advisers consulted a series of property experts on how to navigate the property market in the run-up to Brexit. The site’s own David Blake advised buyers to avoid jumping into fixed rates and making rash decisions. He said the market was becoming more favourable to buyers and said he expected prices to stabilise in the future even in the event of a short-term drop. At a time of lower mortgage rates, many buyers may be tempted into leaping into a fixed rate option “without considering the alternatives”. He added that there were several flexible products that wouldn’t remove the opportunity to re-mortgage further down the line should rates start to change.
Is now a good time to buy?
Kate Faulkner of propertychecklists.co.uk said those thinking of making a long-term investment should act now and purchase a property. She said some would-be buyers were hesitant to proceed, hoping prices would fall but claimed supply was also falling at the same time. Faulkner encouraged buyers to act now and “mitigate the risks”, saying the market would correct itself a few years down the line even if there was a temporary drop in value, echoing the advice of Blake. Landlords were reassured that reduced stock levels were likely to result in rent rises, though she did advise landlords to gain a rich understanding of their objectives and whether the investment was likely to be of benefit in the short and long-term.
When the picture is clearer
NAEA Propertymark Chief Executive Mark Hayward acknowledged concerns over Brexit but said a “flurry of activity” could occur once more certainty was available. The National Landlords Association’s Chris Norris expected long-established portfolio landlords to do particularly well during the coming years in spite of concerns about uncertainty and decreasing demand from those coming to live and work in the UK.
“Certainty of demand”
Executive chairman of the Home Builders Federation Stewart Baseley said the new-build market had “remained strong” over recent months and that he expected this to continue following the extension of the Home to Buy Scheme. The “certainty of demand” was allowing builders to plan ahead and boost their output, with record highs of planning permissions being granted by the authorities. He said the industry required skilled labour from overseas if housing targets were to be achieved.
House prices with and without a deal
Capital Economics property economist Hansen Lu predicted prices would rise by 1% in 2019 if a Brexit deal was agreed. Lu said the UK was likely to avoid a house price crash even in the event of a no-deal Brexit. The EY Item Club expected prices to rise by 2% this year in the event of a deal but to fall by 5% if no deal was agreed. Zoopla recently announced that prices were rising by double-digit figures in parts of the North, specifically the cities Manchester, Birmingham, Liverpool and Leeds, with Leicester seeing similar house price rises.