The fallout is continuing to be felt from the momentous result of the EU Referendum. With a majority of people choosing to leave the European Union, politicians must now chart a new path for the country.
Yet, amid the political repercussions it is important to think about the wider impact of a ‘Brexit’. One of the clearest indicators of the performance of the economy comes in the shape of the housing market. The price of properties had reached a level that required first time buyers to save for more than a decade to be able to get onto the ladder – will that now change?
What happened to the economy after the Brexit vote?
It’s fair to say the global markets were shocked by early reports of a strong vote in favour of leaving the European Union. As more and more counts declared, the pound plummeted to its lowest level in more than 30 years. The FTSE 250 Index of the most profitable country’s plunged 14.2 per cent and ratings agencies S&P and Moody’s downgraded the UK’s AAA credit rating. We’re yet to see how this shock will translate over the longer term.
What the experts are saying about the housing market
So, what does this mean for housing? Most believe that house prices will now come down. In the run up to the vote, the Treasury warned that this could be by as much as 18 per cent in two years. Zoopla, meanwhile, raised fears that a total of £1.5 trillion will be wiped off the total value of the UK’s housing stock.
Meanwhile, KPMG reckons prices will drop five per cent outside London and slightly more inside the capital.
Is this good news for first time buyers?
The housing market isn’t a black and white issue. Yes, a fall in prices might mean the cost comes within easier reach for first time buyers but it’s more complicated than that.
Big banks suffered heavily from the fall in markets, for example, and that might hamper their ability to lend. Developers may also find it tougher to go ahead with housebuilding schemes. The Bank Of England may be forced to raise interest rates to sure up the pound and that, in turn, would impact on the mortgage deals available.
A weaker pound could also prove attractive to overseas buyers. Investors in Europe and America might well want to capitalise while their money goes further. That might have a particular relevance for the sort of luxury London homes featured on Property Listings.
The timetable to political stability
David Cameron left his position in Downing Street on the 12th July 2016, with his successor Theresa May installed at Number 10 the following day after the Conservative Party was embroiled in a short leadership election between May and Andrea Leadsom.
Once in position, it is expected that Theresa May will make the UK’s position much clearer. It’ll be up to her to offer the sort of reassurance needed to stabilise the pound and wider economy. Only once this occurs will we see the longer term trend in house prices and the full effect for first time buyers.