Real Estate in UK Post Brexit

In the weeks leading up to the 23 June Brexit referendum, many dire predictions were made regarding the effect that leaving the EU would have on the country’s real estate market. Now that a few months have passed, let’s take a look at real estate prices post Brexit. Do the worst predictions appear to be coming true? How have property prices around the nation been affected? What about Oxford and prime central London? As you will see, although things don’t necessarily look great, they don’t look nearly as bad as many had feared.

Dire Predictions

Even the most knowledgeable experts were uncertain about how the Brexit impact on property prices would unfold. However, most predicted major declines, including drops in the double-digits.

For example, then-Chancellor George Osborne famously stated that house prices could fall by 10 to 18 per cent by the year 2018 if Brexit occurred. Fitch, a ratings agency, forecasted that house prices could plunge by up to 25 per cent. Always looking for a silver lining, the agency pointed out that since UK house prices were already up to 25 per cent above sustainable levels versus disposable income, so they believed that Brexit could level the playing field a little, as it were.

Were Those Predictions Borne Out?

While only a few months have passed since Brexit happened and it’s a bit premature to know exactly how it will impact UK home prices, it already appears that those dire predictions were a little too extreme:

  • HMRC - According to HMRC, the real estate market in the UK in the first month post-Brexit remained resilient, with 104,200 property transactions in July, which was 0.7 per cent more than in June. However, when seasonally adjusted, this figure represents a drop of 0.9 per cent.
  • BBA - The British Bankers’ Association recently weighed in on the Brexit aftermath, noting that 37,622 mortgages were approved by high street banks in July, which was down by about 5 per cent versus June. It was also the lowest number in 18 months. However, the value of approvals increased by 6 per cent year on year, which was largely due to remortgaging thanks to low interest rates. The BBA predicts that house prices will “ease back” in the coming months, with a dip of about 3 per cent by the end of this year then an additional drop of about 5 per cent in 2017.
  • UBS - Prior to Brexit, UBS Wealth Management predicted that UK house prices would continue to increase through the end of 2016. Now, the agency expects them to remain steady through the end of the year.
  • Countrywide - Uncertainty following the Leave victory spurred Countrywide to predict a slowdown in house price growth in the second half of 2016, with prices dropping by about 1 per cent across the country. As a whole, the company expects prices will have risen by about 2 per cent for 2016. This sounds promising, but prices rose by 8.5 per cent in 2014 and by 6.5 per cent in 2015, so it is clear that Countrywide expects UK property price increases to slow significantly.

Oxford Property Prices Pre- and Post-Brexit

Data regarding house prices in Oxford through the end of July 2016 is now available, and it bucks the overall trend that we have been seeing in other parts of the country. By the end of July, the average property price in Oxford was £416,000. This represents an increase of 10.1 per cent over July 2015. Across the UK, home prices increased by 8.1 per cent over the same year-to-year period. Prices in Oxford were up by 4.7 per cent over the last three months, and they were up by 0.7 per cent in the last month.

London Real Estate Prices Post-Brexit

Because of economic uncertainty due to Brexit, home prices in London are expected to fall for the first time since 2009. According to Countrywide, price growth for homes in London will slow to just 3.5 per cent this year, and they will drop by an additional 1.25 per cent in 2017.

Currently, London properties are taking longer to sell. They were staying on the market five days longer in June as opposed to in May. This trend appears to be intensifying, and it could be due to decreasing consumer confidence.

It is important to note that the London real estate market slowdown isn’t just because of Brexit. It has much more to do with the introduction of two new stamp duties, including a higher rate of stamp duty on second homes, which was introduced in April. Of course, Brexit isn’t helping matters.

Post-Brexit Prime Central London Real Estate

According to Knight Frank, prime house prices have fallen 1.5 per cent in the year up through July. Prices in prime central London, including Kensington and Westminster, dropped by 6 per cent overall in 2016 thus far and are expected to stagnate in 2017.

Knightsbridge and Belgravia Property Prices Post-Brexit

Despite Brexit and new, unpopular stamp duties, property prices in Knightsbridge and Belgravia have held steady. More notably, viewings for prime properties in June 2016 soared by 40 per cent over June 2015. What makes this pocket of London seemingly invincible when compared with other parts of the city and country? Britain’s falling pound is almost certainly the culprit. Without it, Knightsbridge and Belgravia would likely mirror the rest of the city and country with regards to its real estate price fluctuations and overall activity.

The Bottom Line

Home ownership is at an all-time low in the UK, and that is largely because young buyers have largely been priced out of the market following the boom that occurred after the 2007-2009 financial crisis. Contrary to the many dire predictions that were made regarding Brexit’s terrible impact on home prices around the country, the market seems to be holding up well thus far. A major caveat here, of course, is that only a few months have passed since the referendum occurred. Stay tuned for new insights and information regarding Brexit’s impact on UK real estate in the weeks and months to come.