With news outlets variously claiming over the past 12 months that Brexit has impacted the property market or made no difference at all, it’s hard to work out what the impact really is.
The reality is it is very difficult to isolate the impact of the referendum on the property market, especially because the vote came months after one of the biggest market game changers since the credit crunch; the 3% rise in stamp duty on second homes.
According to the Council of Mortgage Lenders, “The distortion caused by this stamp duty change appears to be larger than any previous stamp duty change we’ve seen”.
Because so many people had brought their buying plans forward to the first quarter of the year to avoid the stamp duty surcharge, by the time we voted to leave the EU, the market was already seeing a fall in transactions.
However, there was clearly some uncertainty that drove a bit of a ‘market wobble’ over the summer, particularly in the prime market. This wasn’t solely due to Brexit; previous stamp duty hikes making those buying in excess of £925,000 pay 10% or more definitely slowed the market too.
There was a more direct impact, though, at least according to the anecdotal evidence I received; it seems some canny buyers just decided to reduce their previous offers and pin the blame on Brexit, while others pulled out of deals, again blaming Brexit, even if the vote wasn’t at fault!
Since the summer of 2016, there is no question that the residential property market has slowed both from a transaction and a property price growth perspective.
The LSL Acadata E&W HPI shows changes in transactions in Q1 by region from 2015 through to 2017. This clearly shows a transactional slowdown, even taking into account the impact of the stamp duty rise. The whole country isn’t suffering though; affected areas are currently restricted to Greater London, the South East and the East of England.
Meanwhile, other regions are still experiencing a rise in transactions compared with 2015; a trend which is matched by the Hometrack Cities Index reporting that the region’s cities are experiencing price increases, too:
So many markets don’t appear affected as yet and where there is a slowdown, this was predicted way before we voted to leave the EU. Indices specialists attribute this more to stricter mortgage lending, such as the need for repayment mortgages, restrictions on lending at 4.5x people’s incomes and assessing people’s affordability at rates of 5-7%.
Overall, the impact is expected to be minimal. Even though there is some uncertainty for foreign buyers due to Brexit, the fall in the pound means bargains are available, while, for the rest of us in the domestic sector, the continued lack of property supply versus demand means most forecasters are only predicting lower growth due to the uncertainty impacting on the economy first, causing property prices and transactions to slow.
The main question mark hangs over the buy to let market, a major user of tradespeople. What we don’t yet know is whether landlords are going to sell up due to increased taxation or if demand for rental properties will reduce dramatically in areas heavily reliant on migrant workers, changing the dynamics of some specific local markets.
However, the good news should be that even if the small landlord buy to let market is hit, whoever is in government, there is a focus on increased supply. All parties are backing new build development, both in the private and social sector, together with the new large landlord ‘build to rent’ market, and this suggests there should still be plenty of work to be secured in the residential property market.
Interested in finding out more on the impact of Brexit on the trade sector? Read more from industry expert, Kate Faulkner on uncertainty and the UK trade sector.
Kate Faulkner is one of the UK’s leading property experts. Kate produces independent property prices and rent reports, working with forward thinking companies to educate and inform consumers on carrying out property projects successfully. Kate co-hosts LBC’s Property Hour, is a BBC5Live midnight expert and regularly appears on the BBC, ITV, in The Telegraph, writing blogs for magazines such as Period Ideas.