The UK housing crisis is nothing new. In the age of austerity, house building is at its lowest since the 1920s. However, many homeowners, prospective buyers and landlords alike share a concern that a no-deal Brexit would exacerbate the current housing market crisis, precipitating a steep fall in house prices in the short-term, followed by years or even decades of uncertainty for owners and buyers.
It could see homeowners trapped in a negative equity reminiscent of the ‘80s and estate agents struggling with fewer properties on the market.
Prime Minister Theresa May’s recent Brexit deal was highly divisive, provoking rather than abating public uncertainty. While the PM recently survived her no-confidence vote earlier this week, many inside and outside of the Conservative party hold serious doubts about her ability to negotiate an economically viable Brexit deal…
Deal or no deal?
When Brexit negotiations first began Mrs May assured the public that “no deal is better than a bad deal”, a statement that makes for a great soundbite, but not one that many economists or the Bank of England have much faith in.
The Bank of England has issued dire warnings that a “no deal” flounce could see house prices fall by up to 35% in a worst-case scenario. This could leave homeowners all over the country trapped in negative equity with properties worth less than the value of their mortgages.
While the industry has hopes that this will be a short-term blow, from which prices will eventually recover, it’s easy to imagine the repercussions this can have on the housing market, as prospective home movers wait out the economic storm.
On the other hand, a steep drop in house prices could provide a much-needed opportunity for first time buyers who have previously been priced out of the market. Yet, in a time of economic uncertainty, who can say how willing people will be to make long-term financial commitments, or how amenable the banks will be to lending?
It may be more likely that larger landlords will simply hoover up these cheaper properties to add to their portfolios.
A strong deal
So, having looked at a no-deal scenario, what happens if a stronger deal is negotiated? This could see a buoyant property market for all parties in 2019, with a bump in market confidence in the UK after a very shaky few years.
Leaving with a good deal (though there’s raging debate as to what that would look like) could drive the market upwards towards the end of next year, as revived consumer confidence drives economic stability, which is surely exactly what the housing industry needs at present.
Moreover, we will have up until December 2020 before anything fundamental changes, with markets remaining under existing EU regulations during the transitional period.
This makes for a far easier transition than a no-deal Brexit could offer the industry.
Hope for the best, prepare for the worst
While industries around the country should develop contingencies for worst case scenarios, the reality of Brexit will be a storm that the industry can hopefully weather. While the financial crash of 2007/08 hit the sector hard, the industry recovered from that and it can recover again.
The primary concern within the industry is that in the event of a no-deal Brexit, the Government will be too busy negotiating our ongoing trading relationships over the transitional period to focus on the problems already inherent in the housing market.
As we saw from this year’s budget, the meagre concessions made were hardly enough to address to ongoing failure of the housing market. The housing market as a whole needs to become a more serious priority for a government that uses strength and stability as its mantra. The government should certainly do more to boost infrastructure and create more opportunities for first time buyers.
Regardless of the result of the Brexit deal, leaving the EU could have varied repercussions for the industry with potential negative consequences for the economy impinging on the government’s ability to spend. It is a widely shared concern that as the Government scrambles to replace lost revenues in the absence of EU concessions, housing will become less and less of a priority.
A more cohesive and proactive approach from the Government and lenders should be adopted in the wake of Brexit, deal or no-deal.