by Ed Firmin
Posted on Thursday, January 5th, 2017 at 14:16
Back in June 2016 the UK was in a frenzy. The surprise vote to leave the EU caused a furore among property investors, housing experts and the wider construction industry. But how has the UK housing market actually been affected, if at all? We take a look.
The initial shock of the referendum certainly made investors cautious, especially in London, with sales enquiries and new instructions falling over the summer months, and more deals falling through than previously. But in September 2016, property demand started to grow again, albeit slowly. Eight months on and the outlook is bright, as national demand from buyers continues to follow an upward trajectory.
Overall, there has been no significant change in the UK housing market since 2015. In fact, according to the Nationwide House Price Index, the UK annual house price growth for 2016 ended at 4.5%, exactly the same figure as for 2015. The Royal Institution of Chartered Surveyors also claimed in September that the housing market had “settled down” again since the referendum. However, the annual growth seen in London did fall below the UK average for the first time in eight years, demonstrating the possible influence of Brexit on property investors in the capital, where property prices are more than double the national average. As the Nationwide report mentions, “house price prospects will depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual”.
On the bright side, UK interest rates have fallen to a record low in recent months – reaching 0.25% in September 2016 – making it easier for investors to purchase property. Many see this as the Bank of England’s way of pacifying concerned buyers and sellers, as well as encouraging a hesitant property market to keep prices buoyant, and with any luck we will see further growth in 2017.
After all, we haven’t even left the EU yet and the process could take years to complete, with the UK remaining part of the EU for at least two years after Article 50 is implemented in March of this year. As such it is far too early to predict what will happen and in many ways, there is no point in worrying about what will happen in the short term. Investors may spend a little more time speculating, but if the price is right, deals will still be done.
So, what are the forecasts for the future of the UK housing market? According to a recent BBC article, predictions for 2017 range from a 4% decline to 4% growth. But there is hope. We are already seeing Government approval for 14 Garden Villages – self-contained communities surrounded by green belt land – to be built across the country to ease housing shortages. This will also give the construction industry a well-needed boost in a time of uncertainty.
However, heading into the new year, the resounding conclusion is that it will be hard to speculate on what will happen until the Government publishes further details of its Brexit manifesto, which it has agreed to do by March 2017. We’ll take another look then, so watch this space!