Has Brexit Already Had an Impact on House Prices?
The Brexit negotiations between Britain and Europe have barely got underway, but the impact on consumer confidence can already be seen. Immediately after the Brexit vote, in which 51.9% of the UK voters opted to leave the European Union, the value of the pound dropped. This was followed by a fall in house prices throughout the country. House prices fell 0.2% in May 2017, followed by a 0.4% fall in April 2017.
photo/ DANIEL DIAZ via pixabay
Despite the correlation between the Brexit vote, the weak pound and falling house prices, there are other factors at play that will have an impact on house prices. Tax hikes that were introduced in April were also likely to have had an impact on lending and consumer confidence. In February, the number of mortgage approvals for house purchases dropped to just 66,100, down from 68,300 in January and well below the estimated 69,900.
While falling house prices from a month-on-month perspective might not seem too disastrous to some ardent leave campaigners, it speaks to wider trends and movement within the market. What is more worrying is that the number of mortgage approvals are down. Mortgages are considered a low risk type of lending, as the loan is secured against the property. Unlike a store credit card, people are much less willing to default on a mortgage payment. Instead, borrowers are much more likely to cut back on other spending in order to be able to make their mortgage repayment.
All of these factors speak to a lack of confidence in the market for a number of factors. The rise in stamp duty means that some people might decide to stay put in their property rather than making a move. The complicated lifetime ISA, which was designed to help first time buyers onto the property market, has also been boycotted by some banks for being too complicated to navigate. The idea is that prospective homeowners pay a certain amount into their ISA every month, and then their conveyancing solicitors can claim a bonus amount on top from the government. However, some have been stung by the scheme after learning that a portion of the government bonus amount won’t be paid out until after the sale is complete, which isn’t much use to first time buyers struggling to get a deposit together.
While falling house prices might seem like good news for first time buyers, there is concern that the fall in consumer lending could have an impact on generation rent who will be excluded from the opportunity to buy property for yet another reason. As so much about Brexit is still unknown, it remains to be seen how this will play out on the property market.
Author: Rebecca Harper
photo Alina Ku-Ku via Shutterstock
