The news is currently crammed full of features about the housing market grinding to a halt over the last couple of weeks and certainly, from what I’ve seen, sales have slowed. One associate who put his house in a lovely village in Medway on the market two months ago, has had only two viewings.
Some say this is because our departure from the EU is looming, but is that really the reason sales have tumbled and prices are seemingly stagnating in Medway? And how true is it that Brexit is – or will – affect the UK housing market?
Certainly the initial concerns that the Brexit vote would cause an immediate market crash have been unfounded. Just a couple of months ago, I wrote an article about house prices in Medway. Below the headlines of the nation press, I found data showing house prices in Medway were still growing – granted at a slower rate but there was still an upward trend.
A more recent Financial Times article stated that the price of the average house in the UK has grown 3% in the year to the end of May 2018. Much inline with my findings for Medway, this is slower growth than the year before the EU referendum, but it’s still growth.
And there was some really positive news for our county this week in the KM, when they stated that house prices in Kent are rising far faster than our neighbouring counties. The report by Ward and Partners compared prices from July to December 2017 with January to June 2018. And the results are interesting….
However there has been a definite down turn in the number of house sales across the South East. Although not as bad as London, where there was a 20% drop in residential property sales when comparing 2017 to 2015, the South East is estimated to have seen an 8.5% drop in sales*.
So prices and sales have slowed and the market is stagnating a little. But is that really because of Brexit? We know that the market is always heavily influenced by wages and interest rates, so it makes sense that while interest rates stay stable and unemployment rates remain low, people won’t be forced to sell. I spoke with a leading high street estate agent who told me much the same. In his view, it is the banks and the estate agents that determine the market trends. Strategic changes to interest rates and taxes (such as stamp duty) are made to address specific areas of a fragmented market, and encourage movement accordingly.
In support of this, media reports have also indicated that the fall in buy-to-let investors is actually playing a large part in the softening of the market. Endless tax and regulatory reforms that eat into landlords’ profits are discouraging investors from expanding their portfolios. Again pointing to economical manoeuvres by the Government and the Banks to change market trends?
Let’s remember that Brexit hasn’t actually happened yet. So does anyone know categorically what will happen when it does? It doesn’t seem so. I read that Mark Carney, the governor of the Bank of England, issued a stern warning that a “disorderly” Brexit would possibly lead to the bank raising consumer prices by raising interest rates, which would further negatively impact the housing market. Surely no one wants a disorderly Brexit.
All the scare mongering aside, the underlying message seems to be that Brexit is still an unknown quantity. One report states a hard Brexit will be worse for house prices but equally a soft Brexit could still have a big impact. Thinking sensibly, removing uncertainty from our economy would mean that maintaining low interest rates would no longer be necessary, so that could also lead to an interest rate rise. And what affects the housing market? Wages and interest rates.
I think for now growth will remain slow and that’s unlikely to change until Brexit is complete. And for many different reasons – who knows what the UK will look like post Brexit…
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