UK HOUSING MARKET MELTDOWN AS BREXIT DEADLINE NEARS
By Navdeep Yadav
“I still remember the Brexit referendum day, I was working at Foxtons: London Estate Agents and a few weeks later I had to quit the job along with many of my colleagues due to market slow down and uncertainty,” said an ex-real estate agent, Octavian Pop.
“The day people voted to leave EU sales market started to shrink, and people stopped investing in the housing market because of the enormous drop in the rates. Foxtons which was growing at the rate of 5 new offices each year had to shut down 5 of their offices that year,” He added.
Much has been reported on the UK housing market since the Brexit divorce, nearly three years ago. While the capital London, the business hub for various job seekers and market investors, has seen prices flatline at a high phase than the other regions of the country.
The Bank of England (BOE) governor Mark Carney last year has warned that if the UK ends up with no deal, It could trigger a recession worse than the 2008 financial crisis in, with house rates dropping by up to a third over three years.
Octavian added “Realistically, it is not about Hard Brexit or Soft Brexit, it is about uncertainty. The uncertainty of falling house prices, Uncertainty of job fear, Uncertainty to leave the UK after Brexit.
“Clients aren't going ahead because they are worried about negative equity and some are postponing because they wanted to be in a more stable position before committing. People are investing more in the foreign equities and stock markets, because of Brexit uncertainty,” said Octavian
Contract in Berlin ends in 2 months so looking for a house back in Banbridge - not much to choose from, huh - UK housing market is glued up and a nightmare for buyers and sellers at the mo.— Jamesie boy! (@CalJamieson) March 9, 2019
To enable increases to be delivered the industry needs certainty about future labour supply from the EU or any other nation. It is essential that, after Brexit, the industry continues to be able to access skilled labour from abroad if housing targets are to be met.
The housing market will undergo a “modest correction” if the UK leaves the EU without a deal, with the biggest fall seen in London.
“Uncertainty post-referendum impacted on new buyer inquiries. A continuation of Brexit uncertainty is likely to put a full stop on the price growth and transactions in the coming months,” said Neel Sayal, real estate analyst at home2u.co.uk.
“As the UK prepares for the Brexit day, many families face a dilemma closer to home: whether to sell the house now or wait for uncertainty to be over and continue renting it,” He added.
The market had already slowed in these three years preceding the vote. The buyers who were ready to sell their house before the voting day have turned their signboards to renting. The sellers are uncertain about the prices and are expecting it to go up with a ‘deal’. Neel added, “It depends what the deal will bring. It is yet not sure if the price will go up. The London market might recover after a deal, but other regions will have a massive impact.”
As the Brexit is approaching, London’s housing market has primarily frozen up, and other parts of Britain have begun to feel the coldness in business. According to the retrieved data from LonRes The Transactions of high-end homes in central London last year reached a decade low.
Overall, with a rise of just 0.1 per cent, according to the Nationwide index; house price growth across Britain in January was at its slowest in almost six years. It remained flat in February, with a 0.4 per cent rise.
“The potential impact of Brexit continue to cause hesitancy, alongside a ordability constraints in parts of the country,” reads out the latest survey report by Royal Institution of Chartered Surveyors (RICS) on the residential market.
RICS said in January their report, new buyer enquiries fell again at the headline level (on a seasonally adjusted basis), marking the sixth successive monthly decline. What’s more, demand softened to some degree across virtually all parts of the UK. Scotland was a slight exception, but even here the trend was only flat.
PM Theresa May, is still on the hunt for a revised exit deal with EU that can gain the support of the opposition in the House of Commons, after which in the transition period the UK and the EU are scheduled to begin talks on their long-term ties.
However, the long-lasting effects on the housing market post-Brexit remain as uncertain as the shape of Brexit itself, and their political views may influence people's homeownership decisions.
The buyer confidence will have a bigger role to play than affordability in house price movements this year and depends on what the comes with Brexit, according to Vijayant Tyagi, Co-founder & Market Analyst at 99home.co.uk.
Vijayant added the market prices had gone down since the Brexit votes. Comparing to last year where there were roughly 1.2M buyers in 2018, the numbers have gone down to less than a million. As the day comes near the prices are going to fall more. The uncertainty remains on the top of the housing market until a ‘good deal’ (deal in favour of the housing market) is sorted out.
Whether you voted to remain or to leave, there’s no denying that the uncertainty around when the UK will leave the EU, and the terms under which it may happen, is causing property market jitters.
The Bank of England reported in the worst case, a 35 per cent drop in house prices could occur. This is only hypothetical of course, and there is no way of knowing precisely what will happen. It is for sure the market might go up, but the loss done will not be recovered in future.
Meanwhile, the fear of uncertainty will remain in the mind of new buyers, and the real estate agencies will struggle with fewer clients. “Those in power are putting their parties' interests first and not realising that the housing market contributes a large part to the economy”, finished Octavian Pop.