What May Happen to Real Estate In The United Kingdom
October 31 is the deadline for the U.K. to leave the European Union. What impact will it have on real estate in the area?
The next few months are going to be important for the real estate market in the U.K. as the discussion to leave the European Union (E.U.) moves quickly towards the October 31 deadline. Prime Minister Theresa May, who guided the first period of negotiation, resigned. It would appear that the ruling party is united in its decision to leave the E.U. on October 31, even without an agreement in place.
According to the U.K. publication, The Week, wages in the U.K. are growing faster than the rate of home price inflation. The job market remains buoyant, offering hope to prospective home buyers. According to the latest Rightmove Property Index, U.K. wage growth currently stands at 3.4 percent compared with house price growth of nearly 2 percent. London is the largest market in Britain and has seen average house prices drop by almost 4 percent over the last 12 months, according to the Office of National Statistics. This is the biggest drop since the recession of 2009. Conversely, some areas in Northern England, Wales and Northern Ireland experienced year-over-year price increases of more than 5 percent.
Since the announcement of Brexit some years ago, the housing market has been marked by volatility and supply constraints, which has sustained prices in many areas. The question everyone is asking now is, “What would the impact of a no-deal Brexit be on the real estate market?”
Worst Case Scenario?
A no-deal Brexit remains the default position if no agreement can be reached. The Bank of England predicted that, in the case of no-deal Brexit, the worst-case scenario could see average home prices drop by up to 30 percent, but there’s no way of telling yet.
Surrenden Invest’s Jonathan Stephens said that the housing market would react slower than the stock exchange, and he expects a slowing in the market without a largescale fall in prices with low unemployment and stable mortgage rates sustaining housing demand. Banks may be less willing to lend in a no-deal scenario as the economic outlook would become riskier. It’s expected that in a no-deal situation, the pound may fall sharply in value, which may give investors some opportunity to make strategic purchases.
A no-deal Brexit would leave the U.K. with no agreements on trade, customs, travel, or citizens’ rights. Plus, there would be no transition period to give U.K. businesses and organizations time to respond to changes. We will watch developments with interest.
REAL Trends has been The Trusted Source of news, analysis, and information on the residential brokerage industry since 1987. We are a privately-held publishing, consulting and communications company based in Castle Rock, Colorado.
Accessibility: We are making efforts to be ADA Compliant. Should you have any challenges or questions please contact us at (303) 741-1000.