6 mins read

Uncertainty seems to be the only thing certain about the current property market. Not only has much needed clarity on the UK’s exit from the European Union been delayed again, another general election has now been scheduled. This opens up the possibility of a shift in economic priorities and housing policy.

Perhaps inevitably, this has led to hesitation among home sellers. House price growth has been slowing, and the number of sales taking place has decreased. It’s unclear whether waiting until we know just what’s going on might help secure a higher price and quicker sale, or if delaying will leave you worse off. But, among sellers, there seems to be a general consensus that now isn’t the best time.

But, buyers don’t necessarily agree. The market is proving resilient, and asking prices are up by an average of 7% across the UK since the Brexit vote. Our research has found that there continues to be plenty of activity from home buyers. The numbers of first time buyers, encouraged by government schemes, continue to grow year-on-year. And, more broadly, greater access to mortgages, and low interest rates, are also encouraging buyers.

London estate agent Knight Frank recently reported on the role of ‘pent up’ demand in stabilising the market. They found in September that the ratio of prospective buyers to new property listings was 14:1. This is the highest level they’d witnessed in 10 years.

Our CEO and co-founder Colby Short notes that, ‘This is extremely positive given the prolonged period of political uncertainty that has plagued the market and demonstrates that the appetite for homeownership remains strong across the UK. However, the current issue is, while there is plenty of fuel, we’re left at the side of the road without a car to put it in.’

Because sellers are currently cautious, there aren’t enough homes available for these buyers. We took a look at what is motivating buyer demand, and whether sellers should be waiting until after Brexit (and the general election) to put their house on the market.

First Time Buyers

According to research by Hometrack, first time buyers were the largest group of purchasers in 2018. They made up over 36% of sales, and their numbers have been increasing year on year. The changes made to Stamp Duty Land Tax in 2017 meant that around 70% of first time buyers in England and Northern Ireland were able to get full or partial relief from stamp duty in 2018 and 2019. This encouraged more people to take their first step onto the housing ladder.

And, these first timers don’t appear to just be looking for cheap or small properties. Evidence shows that the average first time buyer is looking for a three bedroom property. National Audit Office statistics also show that over 80% of Help-to-Buy purchases were of houses rather than flats.

It seems that first time buyers are looking towards the future and buying homes with family life in mind. They are able to afford these properties not only through the government changes to stamp duty and help-to-buy schemes, but also by taking out longer-term mortgages.

The rising demand from first time buyers doesn’t appear to be diminishing but there’s an increasing lack of homes available for them. Let alone family homes that suit their aspirations.

Mortgage Rates

In times of uncertainty you would generally expect a certain level of timidity from the banks. Yet this year the number of mortgages approved was the highest it’s been in two years. The greater availability of mortgages, along with a low rate of unemployment and a growing indifference to political events (‘Brexit fatigue’) means demand from property buyers, although slightly diminished, remains consistent.

In the event of a no-deal Brexit, banks are likely to become less willing to lend for a time. This is because an uncertain economic outlook is seen as riskier for lenders. In contrast, if we leave the European Union with a deal, the period of uncertainty is likely to be much shorter.

Investors

Several industry commentators have noted how Brexit has increased international interest in the UK property market. The reduced value of the pound compared to other currencies means that British property is more attractive to foreign buyers. Last year, China’s largest seller of foreign property, Juwai.com, found interest in British property had tripled from the previous year. The greatest rise in interest was in property located in the North and the Midlands.

Research by Hamptons International found that the average home in the UK cost £53,065 less than it did in 2014 for a US dollar buyer. This discount of approximately 23% is due to the fall in the value of the pound in relation to other currencies. The pound’s depreciation is encouraging international investors, because property appears cheaper, even if the sterling price remains the same.

Personal circumstances should be more important than Brexit uncertainty

According to a recent YouGov poll the majority of people think that the General Election on 12th December won’t resolve the issue of Brexit. There’s an expectation that uncertainty will remain for a while. But, people are getting tired of unpredictability, and necessity is driving the property market forward regardless. In comparison to the financial crash of 2008, the impact on the property sector has been reasonably mild. Some areas, particularly in the North and Midlands, are even witnessing a growth in house prices. This suggests Brexit is only one of many factors impacting the market.

Families grow or downsize, individuals move jobs or city, and aspiring homeowners want to get a foot on the property ladder. Personal circumstances make buying property a necessity regardless of the political situation encouraging demand even in instances when you wouldn’t expect it.

Is the situation likely to get worse after Brexit?

No one can say for sure what will happen to the property market after Brexit. Partly because the situation is unprecedented, and partly because so many other things also impact house prices. There’s a general belief that leaving the EU will cause a reduction in house prices. There’s also agreement that leaving without a deal will cause a significantly larger decrease that’ll take longer to overcome.

In one estimate, the Governor of the Bank of England, Mark Carney, suggested that a no-deal Brexit could cause house prices to fall as much as 35% over three years. KPMG are more optimistic. They suggest that a no-deal could cause an average decline in house prices of 6.2% in 2020. London and Northern Ireland would feel a greater impact, with falls of 10-20%. In contrast, if there’s a smooth exit from the EU, KPMG expects that the UK will see modest improvements to growth a year later.

There’s an expectation that buyers and sellers will be worse off in the event of Brexit, but there’s little agreement on how bad it will be. If you know you want to move house, waiting until there’s greater clarity might leave you worse off.

It’s still too early to predict with any certainty the extent of the impact Brexit will have on property values, so it’s best to assess your personal position, and your long term needs first. Making sure you’re supported by an experienced estate agent will make a huge difference. They’ll be able to inform you of the state of your local market and are likely to be aware of the interested buyers in your area.