- Brexit uncertainty reduces UK investment.
- A no-deal Brexit could cause a property crash.
- Current landlords amongst the minority to benefit.
With the Prime Minister recently stating that the current Brexit deal is the only viable agreement, and with a forecasted majority of MPs appearing to oppose the current deal, we could well be facing a no-deal Brexit.
House prices are already falling, buyers are being more cautious, and deals are taking longer to complete. The downward pressure on prices in London appears to be spreading beyond the capital.
What is the property forecast for a no-deal Brexit?
A no-deal Brexit could reduce house prices by 35%, according to Mark Carney of the Bank of England. As a property buyer, on the face of it, this would appear to be positive news.
Property prices have risen in recent years at a higher rate than that of wages according to the ONS 2018 report, with many calling for a decline in house prices. However, where a steady decline is favourable for buyers, a crash in property prices is likely to have negative consequences for everyone.
Jamie Johnson, investment manager and founder of FJP Investment shares his thoughts on the outlook for UK property.
“A no-deal Brexit will be a total disaster for the property market, with the effects of Brexit already seriously depressing the market”.
According to global real estate provider Savills, fewer homes will be built to facilitate the increasing number of first-time buyers, with this falling by as much as a quarter. The reasons for this fall in development being the reduced profit margin on new developments due to falling property prices.
With reduced levels of affordable housing, we also tend to see a ‘clog’ in the chain, as most of the affordable housing is bought up by large investors. This causes current homeowners to be haunted by negative equity, whereby they become trapped in homes they cannot sell.
Jamie Johnson goes on to say, “current landlords may be the only ones to benefit, with less ability to borrow for mortgages and the unfortunate likelihood of those repossessed needing somewhere to live”.
With the reduced likelihood of attaining loans against a declining collateral and low confidence from businesses to invest in a falling economy, a property crash could compound an already sorry state of affairs for the UK economy.