It’s a trying time for UK homeowners, especially those deciding whether to buy or sell property. One thing that both the Leave and Remain camps can both agree on is that there’s likely to be some form of economic volatility when Britain leaves the EU in 2019.
One piece of good news is that the housing market has proved fairly resilient so far. It’s true that property prices have dropped somewhat but the all-out market collapse feared by some economists has failed to materialise. Thus far, the decline has been modest and the market appears fairly resilient.
When it comes to the decision whether to buy or sell, much depends on your location. While prices remain relatively stable, the actual number of sales has fallen off significantly in certain regions. Some places are seeing a much sharper drop than others, with London being the most dramatically affected. The capital has seen a 20% drop in the number of sales between 2015 and 2017, with buyers reluctant to meet the city’s notoriously high prices and sellers equally disinclined to lower their demands. Many property owners are choosing to sit tight and wait, hoping that prices will recover. In contrast, the North of England has seen an uptick in the number of sales.
Another factor is the kind of Brexit that the UK may face. While a “soft” Brexit with a deal in place would cause some disruption to the property market, a disorderly “hard” Brexit with no deal would be far more disruptive and unpredictable. If EU nationals are forced to leave the UK in the wake of Brexit, regions where many EU nationals live may suffer a drop in house prices as people leave the community. Even with a transitional period as proposed by the Prime Minister, wherein there would be no change in residential status till 2021, many people may choose to return home or move to other parts of the EU ahead of that date.
Areas where there are fewer people from the European Union will be less affected but prices may be hit by other factors, such as a decline in the economy or a rise in interest rates. The general opinion among economists is that Brexit is likely to cause a decline in wage growth, which will in turn tend to depress house prices.
Regardless of the type of Brexit, there’s unlikely to be much growth in the housing market in the next five years. For some, selling before then could mean taking a loss. This needs to be weighed against the real possibility of further and steeper declines in house prices following March 2019. Selling now could help some property owners being saddled with a potentially undervalued asset after Britain leaves the EU.
