Brexit and Bricks & Mortar
Will there – won’t there – be a deal? The guess as to which side the Brexit barometer line is far more likely to fall on changes pretty much daily.
But one thing is for sure – regardless of what kind of Brexit we have, Britain’s exit from the European Union on December 31 this year will have some kind of effect on house prices.
Just how much of an effect, and whether it’s anything to get concerned about, remains to be seen. After all, the property market managed to survive that spontaneous seven weeks shutdown earlier this year. Albeit, it was helped by a surge in house prices following pent-up buyer demand and the Stamp Duty Holiday. And, the latter, as we have all been told repeatedly, is due to end abruptly on March 31 next year (despite protests to the contrary).
Meanwhile, house prices are at a record high – Nationwide reported a rise of 6.5% for November while Halifax said the average UK house price is now a record £253,243. And that’s not all; mortgage approvals are at a 13-month high.
But, getting back to Brexit… a few property experts have their own opinions on how much an effect a Deal or No Deal Brexit will have. And it’s interesting to see those predictions don’t really differ too much.
More about transactions than prices
Anthony Codling, founder of property website Twindig, believes many property analysts are currently focusing on the wrong set of numbers. It’s more about house sales than post-Brexit house prices, he insists.
“If a Brexit deal or a Brexit No Deal leads to a rise in unemployment or more importantly a rise in the fear of unemployment, we would expect housing transactions to fall and remain at a lower level until the Brexit dust has settled,” he says.
“It is unlikely in our view that house price will fall significantly as a result of Brexit.”
Only London and the South East affected by No Deal Brexit
Nicholas Morrey from independent mortgage broker John Charcol reckons there will be a strong negative effect on house prices. But, this would be localised – to London and the South East. These southern regions, he adds, are ‘very sensitive’ to the results of Brexit whereas ‘the northern regions were in favour of Brexit from the off.’
He added: “I suspect the property market won’t be impacted anywhere near as much by a No Deal Brexit than people think. Certainly not in the short term. Potentially in the longer term.
“It’s just been dwarfed by the other factors going on at the moment. But to get a trade deal will increase confidence and hopefully make the property market more resilient.”
He believes a No Deal Brexit won’t affect the overseas property market too much since there isn’t a large number of overseas buyers clamouring to buy property in the UK anyhow. The Stamp Duty Holiday coming to end, he says, is more likely to have a bigger impact on house prices.
His sentiments regards the ending of the Stamp Duty holiday is echoed by HomeOwners Alliance Founder Paula Higgins. But she believes Brexit won’t necessarily put overseas buyers off, especially since a No Deal Brexit will weaken the pound, making UK property more attractive.
“History has shown that a No Deal Brexit may not have as much impact as we think it could,” she added, tellingly.
The 2 Million Forgotten Property Sellers
While many investors these days get caught up in the whirlwind that is the UK property market, there are the would-be sellers sitting mournfully at the side lines.
These are the home owners who are the most desperate to sell. And there are around two million of them. They either can’t get mortgages because of cladding issues, or they are stuck in a freehold nightmare and facing escalating land rents.
These are also the individuals who must find the latest statistics on property price rises, in particular, incredibly galling. Many of the homeowners whose apartment blocks have ‘dangerous’ cladding have been told their homes are now ‘worthless.’
Cost of average UK property up more than £15,000
So, what are the latest rises? Well, take a look at this month’s Halifax building society statistics. They have just declared that the average UK property has increased by £15,409 since the summer (June). Their figures are based on the number of mortgages approved.
Other House Price Indexes, including government property sales figures, tell a similar story of a buoyant property market.
The estate agency body NAEA Propertymarket, for instance, announced via its latest survey that the number of prospective property buyers was the highest ever for the month of October ie since records began back in 2006. An average of 12 sales were agreed per estate agents. Not only that, but the number of first-time buyers also increased – from 19% in September to 21% in October.
Grenfell sales legacy looms large
Campaigners from the End Our Cladding Scandal group say there are a huge 1.93 million homeowners in England unable to get their homes sold and move on. No-one wants to buy their property, mortgage lenders won’t entertain them and, as you might expect, home insurance is through the roof.
For those high-rise apartment dwellers whose homes are surrounded by safe cladding, they have a long wait ahead of them to prove it. An EWS1 form will do this, but the waiting list is huge, and it doesn’t come cheaply either. This EWS1 form is part of new government regulations introduced following the Grenfell Fire Tragedy in 2017.
Freehold scandal of developers is binding
And what of the unfortunate leaseholders who don’t own the land on which their property is built? It’s reckoned there are around 100,000 such homeowners – most of whom bought a New Build from either Barratt Developments, Countryside Properties, Persimmon and Taylor Wimpey. Their ground rents double every 10 years or so. To buy the freehold themselves costs thousands and, understandably, deters potential buyers.
An article in the Telegraph newspaper points out that if these two million “mortgage prisoners” were added to the sales figures, with a selling price of £000, then the average property valuation would be down. Not only that, but instead of a 4.9% increase, it would be a 7.4% fall year-on-year. Not such a ‘buoyant’ property market now. Will it all unravel when the Stamp Duty Holiday comes to an end? There are increasing calls for Rishi Sunak to extend this beyond the March 31 deadline. Watch this space…
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