How Brexit Will Impact House Prices

After the Brexit referendum in June 2016, there was speculation on how the change would affect many different aspects of our lives.

House prices was one of these considerations, and there have been many reports on what has happened since the vote as well as what to expect after the United Kingdom leaves the European Union.

Expectations vs. reality

Before the referendum, the International Monetary Fund predicted a house price crash in the event of the vote. However, the fall in house prices hasn’t been as low as suspected.

The Royal Institution of Chartered Surveyors (Rics) have reported a mix in house price changes since the Brexit vote. In London and South-East England there have been falling prices, but there have been rises in the West Midlands, the south west, and Northern Ireland.

In the years before the Brexit vote house prices had gone up by around 8% each year, but year-on-year growth has fallen below 5% more recently.

The changes in mortgage rates

In the latest Bank of England inflation report, it was revealed that mortgage rates are currently lower than ever.

The fixed cost for a 90% mortgage loan is currently 2.5% for two years, compared to 4.1% between 2013 and 2015, and 6% between 2009 and 2012.

There have been hints that these low rates won’t last for much longer, which is already having an impact on the financial markets as interest on other borrowing has already risen because of this suggestion. This could result in more expensive mortgages once the Brexit negotiations are complete.

Housing supply and demand since the Brexit vote

Between May and June of this year there was a 3% decline in house sales, reaching the lowest number since October 2016.

Rics have noted in an update that buyer demand hasn’t seen any considerable growth since last November, and that the number of properties estate agents have listed are close to record lows.

The low supply and high demand of housing has historically been the cause of higher housing prices. Between 2015 and 2016, around 190,000 homes were built which was the largest amount in eight years, but was still lower than the national demand of 300,000 new homes a year.

What will happen as Brexit approaches?

The researchers at the bank Morgan Stanley have predicted a further fall in house prices and number of sales as we get further into the Brexit process.

Their forecast suggests GDP growth in Q4 of 2018 will dip to -3%, placing the economy in a weak position as Brexit is finalized.

This, they say, will be due to weak income growth caused by above-target inflation, less favourable tax treatment for buyers, and a slowing population growth.

PwC have released a report which also notes the fall in property sales, and agrees that the fluctuation in house prices haven’t been as bad as expected but suggests prices are still likely to decline by half – from 7% last year to 3.7% this year.

Changes in house prices in the Berkshire area

House price growth has traditionally been higher in London than in the rest of the UK. However, with changes to stamp duty and since the Brexit referendum, this growth has been pushed and distributed outwards.

Within central London boroughs, house prices have slowed down while locations in the outer boroughs and on the commuter belt have risen.

Evidence suggests that house prices in commuter belt towns have exceeded central London’s average increase by 4% over the past two years.

As Berkshire is a prime location for London commuters to live, this has created the possibility of house prices rising in our county. The introduction of the upcoming Crossrail in Reading could also coincide with Brexit house price rises, too.

Can we be certain that Brexit will have an impact on house prices?

As the Brexit referendum approached in June of last year, there were many panicked reports and suggestions that there would be a big impact on house prices should we decide to leave the EU.

However, as recent analysis has shown, the reality hasn’t been as damaging as experts originally believed.

There is no denying that there has been a fluctuation in house prices over the past year, and that the number of property sales has certainly dropped. But, with there still being a long way to go until the Brexit negotiations are complete and the United Kingdom comes out of the EU, it is difficult to predict the future.


Are you looking to buy or sell a property, but aren’t sure if this is the right time? Our solicitors offer advice and guidance which will help to make the right decision for you. Call us on 0800 085 5575.