RICS Registered Valuer Robin Wells considers the impact of Brexit on commercial and residential property markets.
With the UK poised to leave the EU in less than a month and no withdrawal agreement in place or any clear way forward to resolve the parliamentary deadlock, there is, understandably, uncertainty within the business community with considerable ‘no deal’ planning / contingency measures being implemented.
While ‘overheated’ property prices in London appear to have stopped increasing or reduced to realistic levels, and there is undoubtedly more caution amongst purchasers / investors due to Brexit and other economic factors there has, to date, been little or no effect on commercial property markets in Plymouth.
The full extent of what transpires immediately prior to and post the Brexit date of 29th March 2019 is an unknown which creates an element of valuation uncertainty and will depend largely on whether a satisfactory deal can be reached or whether the UK leaves the EU with no deal. A proportion of property vendors, particularly in the residential sector, appear to be holding back until after the uncertainty has passed before putting houses on the market, although this has accentuated a shortage of freehold property available and buyers are faced with a shortage of choice keeping prices stable. Favourable exchange rates for foreign investors are also maintaining demand in larger cities.
House price predictions vary between market commentators with some predicting house price crashes and others expecting small adjustments or a ‘slowdown’. Looking back at the effect of the referendum result on the housing market, house price growth plummeted following the referendum in June 2016; then, in September 2018, Bank of England governor Mark Carney warned that a no-deal Brexit could send house prices tumbling by a third. But plenty happened between those two events, as well as since September 2018.
House prices did stagnate following the referendum in June 2016 which may give an indication of what lies ahead after Brexit, but this could also have been due to the usual pattern of prices growing in spring and plateauing over the summer holiday period. With Brexit looming ever closer, house prices suffered a bigger post-summer dip than usual in 2018, dropping from a peak of £232,797 average price in August to £230,630 in November. The latest ONS House Price Index shows that they increased slightly in December, meaning that the current average UK house price is £230,776.
Buying a property should generally be regarded as a long-term investment and, even if there is a short-term price drop due to Brexit or other factors, house prices are likely to stabilise in the longer term and mortgage rates remain very low making borrowing affordable and rental returns attractive.
Brexit is still a complete unknown and the truth is that nobody actually know how it will all end and what effect it will have on the property market. Indeed, this is true of any change in market conditions or economic downturn. Markets do not react well to uncertainty in the short term but longer term trends are generally more stable or positive. In the meantime, we have no choice but to wait and see and valuations will be caveated accordingly.