There are still no answers when it comes to whether there will be a Deal or No Deal Brexit. One thing, though, is completely certain is that the property market does not like this uncertainty. UK housing prices face the risk of a substantial crash, particularly in London and Northern Ireland if there is a No Deal Brexit.
Though currently resilient, property values could see a drop of up to 7.5% in some regions. Nationwide, a 6% reduction could be in the cards. In this article, we will go over what buyers, landlords and renter should be looking out for when deciding on how to proceed.
Buyer’s market?
Usually, an economic downturn brings out buyers. There are generally some bargains to be had. Is that the case now? There may be some deals to be had relative to the market just a few short years ago. However, right now prices are not headed down. In fact, prices are still rising, just not as fast as they used to. Does this mean the buy to let market is set to grow? Actually, no. There are new regulations in place and a 3% Stamp Duty Surcharge which is scaring off potential landlords. Landlords are not feeling particularly optimistic about the potential post-Brexit property market. AlanBoswell.com is reporting that landlords across are worried, with the one exception being in Devon county.
First-time buyers are finding some affordable options, but the uncertainty around the economy has caused banks to tighten up their lending requirements making it harder to gain access for some.
Interest rates on hold
Right now interest rates are holding steady, but a cut in the near future looks likely. Adding to the uncertainty is the US-China trade war. These two events could slow the economy down and warrant a cut in the interest rate. Global growth will likely slow down in unison with Brexit which would generate some inflationary pressures would be reduced. Markets do not like instability and the Bank of England indicated that this uncertainty could very well be entrenched even after Brexit. Since it is hard to know exactly how things will play out, it could mean a rise in rates, too. Which is why it makes sense for prospective buyers to go ahead and buy now instead of waiting. It could end up being more expensive later on.
One thing is certain, the delay in leaving is hurting the property market and the economy overall. Central banks all over the world are slashing their interest rates in response to the sluggish economy.
Worst case scenario
It seems like a No Deal Brexit is the worst possible outcome regarding the property market. A market like London would have the short term effect of a downward trend since it is the area that is going to be affected most across many different industries. There are predictions that London could see a 20% drop in prices by next year. Though, prices might rebound faster in a No Deal scenario than if a deal is made, depending on how the government is able to mitigate the effects.
Of course, it is all speculation at this point and that is the root of the problem. Nobody knows how things will look post Brexit in the event of a No Deal. Certainly, every region will feel the effects. It’s simply a question of how acute it will be depending on the circumstances in each county.
A deal with the EU upon exit would be the best case scenario for the property market as at least there would be some kind of certainty that banks could hang their hats on. Even though a new relationship with the EU would take time, there would likely be a return to growth relatively quickly as the market would know what to expect in the near future.
This is the least likely scenario according to how things are currently playing out.
Where is there an opportunity to buy?
Since the hot button issue surrounding Brexit is the border between Northern Ireland and The Republic of Ireland, there may be some good investment potential there. As the pound falls, border towns could see an uptick in trade with their southerly neighbors. The pound is predicted to dip against the euro if a No Deal Brexit happens which would make it very attractive for cross border activity and an increase in property values in those areas.
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