How will Brexit affect UK house prices?

From the minute the UK voted to leave the European Union in the 2016 referendum, questions and debate about how Britain’s housing market will fare under Brexit have been escalating with uncertainty and division.

As negotiations with the EU heat up ahead of the impending official exiting date in March 2019, homeowners and prospective homeowners watch nervously on how Brexit will affect UK house prices.

While speculation and division about Brexit’s impact on the UK housing market show little sign of abating, there are certain facts that shouldn’t be ignored in relation to the country’s housing market and the exiting of the European Union.

In London, according to the Land Registry, house prices fell for the fourth month running in May this year, dipping by 0.4%, slicing around £2,000 off the value of the average home. Experts predict that with continued Brexit uncertainty, London house prices are unlikely to resume their former upward growth any time soon.

But how much of the softening of the housing market can be pinned on Brexit?

House prices across the country have slowed since the 2016 EU referendum, with somewhat considerable variation between different regions.

According to data from the Office for National Statistics, house price growth in Britain to May 2018 stood at 8% less compared to 2015, a year before the referendum. This suggests that the Brexit vote has had a negative effect on Britain’s property market.

Is the industry likely to fare worse or better when we officially leave the bloc early next year?

The property market is principally influenced by interest rates and salaries. As FT notes, many economists forecast Brexit will supress wages.

It is also commonly believed that inflation will come down from its current 3% rate to closer to the 2% rate target by 2020 and that the Bank of England rate will go up to around 1.25%.

A high Bank rate means higher costs associated with mortgage borrowing, which could negatively affect the housing market, as mortgages will be less attractive and affordable to buyers.

Some are also arguing that the harder the Brexit deal is, with greater barriers to trade, the more growth will fall, which will be worse for house prices.

However, the extent of Brexit’s impact on property prices in Britain is not yet determined. As Lucian Cook, head of research at Savills told FT:

“What [Brexit] means [for the property market] is dependent on what it means for the economy.”

Whatever outcome the ‘Brexit effect’ has on Britain’s housing market and given the complex nature of Brexit’s impact on the economy and housing, it is important owners of non-standard residential property, such as holiday home owners and landlords, have adequate insurance in place.

Nelson Policies at Lloyd’s has a strong reputation within the non-standard household marketplace by consistently being able to offer competitive rates on properties that can be difficult to place.

For more information about our insurance solutions for non-standard residential property, get in touch with Nelson Policies at Lloyd’s friendly team of residential property insurance experts.

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