Most ordinary people in the UK do not have an extensive portfolio of stocks, shares and savings. But the one thing that they could rely upon in the past was a property. By and large, property was guaranteed to go up in value. But, the interaction between Brexit and housing costs could price many out of the market. Will you be able to buy a house after Brexit?
Of course, there have been recessions when the value of property has slumped. But, for most people, even if they were using payday loans to get through the month, if they sat it out, the overall value of their home would continue to rise providing, if not a comfortable retirement, at the least a mortgage free home.
With the advent of Brexit, it would appear that property is no longer the safe haven for savings that it once was. Like every other aspect of life in the UK, property prices have and will continue to be impacted by Brexit.
It has been some four months since the momentous referendum in which the UK voted to leave the EU. In that time the economy has contracted. New orders in the manufacturing industry have fallen, the Bank of England has cut interest rates yet again. There has been fear and uncertainty among some business owners who are putting off decisions about investment and growth.
In the midst of this uncertainty, the property market has seen a slowdown. Many families are opting to stay put rather than risk moving to a more expensive home when they are unsure about their jobs and the future.
Post Brexit worries have hit the property market and the demand from buyers has fallen to the lowest in eight years. Following the credit crisis in 2007/2008, from which the property market was slowly recovering, this latest blow is worrying both sellers and buyers.
Price Reductions In Property
Brexit and housing costs have not yet come into full play. There have not been many instances of imminent individual sales collapsing. But, there has been an apparent decline in prices both in the South East and the rest of the country. Combine this uncertainty with the increase in stamp duty and it is clear that the slowdown has worried many estate agents as well as potential buyers and sellers.
In election years it is not unusual for the property market to be unsettled. Therefore it has not come as a surprise that the result of the referendum has caused a downturn. However, the extended period of uncertainty that lies ahead means that there is a possibility that only those people who have to move will do so.
In the months preceding the referendum, the remain campaigners forecast that the value of houses in the UK could fall by as much as 18% following a Brexit scenario. Surveys have shown differing results. Some show a loss of momentum, others show an increase albeit a small one each month since the result of the vote.
The longer the period of uncertainty about what is going to happen, the more chance there is of property prices stagnating. And, if as seems likely since the downward run on the pound, there is a sharp rise in inflation, the value of your home could be affected.
So, if you are considering moving house, you may be forced to consider a serious reduction in price if you need to move quickly. As the value of the pound continues to be affected, the overall result is that property values in the UK will weaken.
Foreign Buyers For UK Properties
Home owners who live in London and the popular areas of the South East could be the exception to the rule. Since the pound is weaker, foreign buyers are with a surge of interest reported by many estate agents. Some purchasers are investing in buy to let properties. Others are investing for the future while prices are so favourable.
Buyers from the US and Europe who now have much more purchase power for their dollars or euros are set upon picking up bargains while the time is ripe.
What Does This Mean For Families In The UK?
The word among those who know is that there is not too much to be worried about in the long term. The housing market in the UK has usually recovered after recessions and even the depression caused by the financial crisis. However, we are now in uncharted waters. No one is going out on a limb and predicting that houses are still the prime investment that they once were.
It has been well reported that there is a chronic shortage of housing in the UK. The results of Brexit may have some impact on house builders which will have a knock-on effect to the public. If demand for homes remains high and the supply of properties does not increase, this could mean that many ordinary families are going to be priced out of the chance of becoming a home owner. Adding a hefty mortgage on top of the monthly budget is out of the question for many, unless they take short term loans for bad credit, just adding to the debt pressure.
So, it is clear that the effects of Brexit on the price of houses in the UK is a complicated subject. On the one hand, prices have stagnated if not fallen and on the other, there is a shortage of properties that may never be filled.
The expensive end of the real estate market will almost certainly hold up. Foreign buyers are queueing up to get a bargain. Anyone who is already an owner of a desirable property will not have a problem selling.
On the other side of the coin, when Brexit and housing costs start to impact the economy, young individuals and families who want to get on the property ladder may never become home owners as the supply of smaller and cheaper properties is quickly drying up.
The impact of Brexit and housing costs will yet become fully apparent. As the slow march towards leaving Europe continues, there is going to be less stability in the real estate market for many months or even years. The fall-out from Brexit will continue to affect the lives of UK families in one of the most crucial areas, that of becoming a proud home owner.