Property Market in the UK Post-Brexit
Although the general consensus is that property is currently a ‘buyers market’ due to a marked slow-down in transactions pre-Brexit, recent house price statistics show that sellers shouldn’t be disheartened. Indeed, the average price of a property in the UK in August was sitting at £213,930 – a 6.9 per cent rise year-on-year with today’s prices similar to those in the months leading up to the Referendum.
And there’s even better news on the horizon with the Royal Institution of Chartered Surveyors (Rics) predicting house prices will continue to rise over the coming months. Admittedly it will be slower than in the past couple of years (Rics reckon it will average out around 3.3 per cent a year to 2021), but it’s an increase nonetheless.
Under-supply fuels house price growth
So, despite the uncertainty over Brexit why are prices still rising? Analysts in all sectors of the industry blame the consistent and severe under-supply of housing. Until this is corrected and demand continues to greatly outstrip supply, the situation will remain positive for home owners.
In fact, only the cost of prime property in central London is falling (as has been for some time). At the same time, house prices in the capital in general are beginning to stabilize (and are expected to remain this way for some time to come).
So it appears the UK has escaped a plunging property price situation post-Brexit. But appearances can be deceptive, warn property watchers. They, like industry, banking, retail and other sectors of British industry, prefer to wait another few months before celebrating in order to see what ‘the real effects’ of the market pre and post-Brexit are. Autumn, traditionally a buoyant period for the property market, will be the real test of consumer confidence, they warn.
Stamp Duty effect and its impact
First-time buyers have – and continue to – face more competition, thanks to the stamp duty imposition on second homes in April. The three per cent tax has been forcing buy-to-let investors, in particular, to look further down the property market price-wise. The result is that many are now seeking one and two properties where stamp duty costs will be considerably lower. A favourable exchange rate for overseas investors means interest remains strong from that quarter too.
Meanwhile, the 95 per cent loans offered by lending institutions under the government’s scheme aimed at helping first-time buyers secure property may still be on the table, but they are reduced in number from previous years with no plans to increase their number, piling on the difficulties for young couples and families.
Mortgage interest rates at record lows
The Bank of England’s recent decision to drop interest rates to 0.25 per cent made mortgages less expensive with a number of tempting fixed rate deals currently on the table for those confident enough to jump in and remortgage, or sign up to one in the first place. And there is no reason not to. The property market remains so uncertain and difficult to predict, that it seems futile for buyers to wait for sellers to reduce prices further since this may, in fact, never happen.
As for house builders, they consider themselves currently unscathed from the Brexit period. Despite a drop of around 20 per cent in reservations pre-Brexit according to one major construction company, the industry was back on track and looking healthy.
So when it comes to selling your house post-Brexit, the consensus it seems is to go right ahead and get those contracts lined up today.