Brexit, a major drag on the UK Housing Market

As the UK’s planned exit from the EU gets significantly closer, the UK housing market has largely frozen up and many places, including London, are beginning to feel the chill. With housing prices falling, and expectations to carry on, Surveyors are blaming Brexit.

Regional House Prices in January 2019 compared to December 2018

The Royal Institution of Chartered Surveyors

The Royal Institution of Chartered Surveyors (Rics), were close to a record low. At slightly over 42 properties per branch in March - edging up from just 42 in February. Rics Chief Economist said “Brexit remains a major drag on activity in the housing market with evidence pointing to potential buyers being reluctant to commit in the face of the heightened sense of uncertainty.” Over 30 percent of Rics members believe the UK housing market will continue to show negatives over the next 3 months.

Remaining Bright Spots

On average, it takes 19 weeks for a property to sell. From listing to completion, this is the longest time period since records started in 2017. Places such as London and the South East, are expected to continue falling over the coming year. These areas have the longest selling times with an average of 21.5 weeks. The two remaining bright spots, in the UK, are Scotland and Northern Ireland. These are the only remaining parts of the UK to see sustained price growth over the past two months. London has certainly been the hardest hit part of the UK housing market.  At the high end, discounts on asking prices are at their highest levels since the financial crisis.

Expectations for the Future

The long-term effects on the housing market in the UK remain as uncertain as Brexit itself, and people’s home ownership decisions may be influenced by their political views. The Rics survey has highlighted the impact Brexit uncertainty has had on the housing market, as stock levels hit all times lows, activity stalled, and sales took longer to complete. Prices are expected to return to growth across most areas over the next 12 months, with Northern Ireland, Scotland and Wales leading the way in terms of surveyors’ expectations. London and the southeast are the only areas where surveyors expect prices to continue falling over the year ahead, Rics said.

Worst-Case Scenario

Mark Carney, Governor of the Bank of England, told the Cabinet that the consequences of leaving the EU could potentially be as severe as a drastic drop of 25-30% over the next three years. He also warned of a worst-case scenario, including rising interest and mortgage rates, higher unemployment and a drop-in inflation. Putting aside all the negatives of Brexit, Mr Carney believes if there is a reasonable deal, there could be a significant boost for the UK economy.

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