How has Brexit has affected house prices?

As the day when Britain officially leaves the European Union growing ever closer (this will take place on 29th March 2019), and with uncertainty as to what the outcome of this will be (talks of a no-deal Brexit continue to permeate) what exactly will become of house prices in the UK as a result of Brexit? As a bridging loan lender, we understand just how important it is to you as a property developer or potential homeowner the impact of house prices can be, so we have taken a look at what the effect has been on property prices across the country since the EU referendum result and what is predicted to happen too.


UK house growth in July

The Guardian reported earlier this summer that UK house prices had grown at the slowest rate recorded in the last five years. London was the most affected, as a result of not only economic uncertainty provoked by the Brexit referendum, but also many households feeling the financial strain.

According to Nationwide’s monthly report, annual price growth had slowed to just 2% in June, from 2.4% in May. This has been the lowest recorded rate of growth since the same month in 2013 when house prices rose by just 1.9%.

In London, the average price of a home in the capital had fallen by 1.9%, to £468,845. Nevertheless, it still remains by far the most expensive area in the UK to purchase property. It isn’t only the uncertainty of Brexit that has caused problems for the London housing market, for it has been hit harder than other regions due to a number of different factors, including much stricter mortgage criteria that is in force, weak wage growth as well as the higher rate of stamp duty that has been implemented since 2016, which has impacted a far higher number of sales in the capital than in other regions of the UK.

Overall, it is anticipated that house prices will rise in 2018 by about 1%, which is a decrease from 2017’s total over 2.6%.

In terms of longer-term predictions, PWC has estimated that house prices will rise by about 3% until 2025, with this being partly provoked by Brexit uncertainty.


Will there be a London house price crash?

Housing market specialists have warned that in the next coming months it could very well be possible that the capital will end up having a house price crash, driven by the fear that Britain could end up leaving the European Union next march without a deal.

In a poll conducted by Reuters in August, surveying over 30 analysts it was estimated that prices will fall in London by 1.6% this year, and 0.1% in 2019. This has been largely attributed by the prediction that international buyers typically attracted to buying property in the capital are going to be put off purchasing houses, due to the lack of decision making as it stands when it comes to Brexit negotiations.


The impact of the Brexit referendum could severely affect house prices in the capital over the next coming years.

What’s more, analysts have stated that they believe there was a one in three chance of there being a ‘significant correction’ or even worse, a full-blown crash if there was a no-deal Brexit in 2019, which could cause serious trouble for UK homeowners. The problem is, the odds of the UK leaving the UK without a deal are on the rise, due to growing opposition to Theresa May’s Chequers plan. Adding to this high inflation rates, rising interest rates and ever increasingly stretched household finances, this may be a recipe for disaster.

The chief executive of specialist home loans company Octane Capital, Jonathan Samuels, stated in an interview with Homes and Property earlier this year that: “A no-deal Brexit could make international business and overseas buyers extremely nervous, at least in the short term”.

“Given that the London property market is heavily exposed to big business and international buyers, if both begin to retreat in the event of a no-deal Brexit, prices in the capital could suffer disproportionately.

He also added that “the London market is already reeling after a period of overexuberant growth, and a chaotic exit from the EU has the potential to accentuate this.”

Could Brexit help first-time buyers?

On the other hand, if there was a London house price crash, it could work to the advantage of first-time buyers. With house prices having continuously risen way above household incomes, making it impossible for many first-time buyers to be able to purchase a house in the capital, a crash could make it far easier for this to happen.