Rise or Fall: Brexits Affect on the Property Market.
On the 31st of January 2020 the United Kingdom left the European Union. The UK will now incur an 11 month transition period in which it will begin trade negotiations with the single market and other countries.
There has been much speculation as to how Britain's exit from the European Union or 'Brexit' will affect the property market.
Property Prices: The referendum and the beginning of 'Brexit'
Since the EU referendum on June 23 2016 the property market arguably slowed. The market has mirrored the ongoing political wrangling that was triggered with the invocation of Article 50 and the uncertainty that was circled as parliament negotiations began.
Average UK Property Prices from 2005-2019
The graph shows a slow and steady rise of property prices since the great recession or the 'credit crunch' of 2009. In June 2016 the market slows in its increase. After a spring boom in 2017 the market then decreases around the same time the UK began its exit process (Article 50).
The speculation around these figures are presumed to be that many homeowners and home buyers delayed buying, or putting their homes on the market at such a politically volatile time.
As a result of the elongated political turmoil and negotiations since June 2016, the UK has left the European Union. The solidity of this reality is expected to trigger a fluctuation in the market once more. Broker from L&C mortgages David Hollingsworth claims uncertainty has weighed on the housing market since the referendum. The fact that Brexit is actually happening now may bring the market back to life and trigger a flurry of activity.
One of the largest factors that implicates what happens next to the UK's property market will be the result of the increase or decrease in wages and lending rates. Current lending rates are still seen to be historically low. The Bank of England's base rate fell to 0.25 after the referendum, standing now at 0.75. It's highest base rate being 15% in 1981.
People tend to buy what they can afford to borrow and at present many lenders are offering great deals for first time buyers. More and more lenders are also supporting more help to buy schemes. This makes it an easier time than ever for first time homeowners to get a mortgage.
CPI and Inflation
Another factor which will implement the housing market's fluctuation is the rate of Consumer Price Index CPI. CPI is how we measure inflation.
The graph shows the pound dropping to its lowest during the anxiety of an unexpected general election at the end of 2019.
The pound dropped to its lowest level against the US dollar in September 2019 since 1985. It was worth less than 1.20 dollars. Its decrease was caused by volatility and anxiousness of another general election on the horizon. The pound is now back up to 1.32 dollars. Still extremely low due to there still being a vast amount of political uncertainty as the UK must now negotiate a trade deal.
CPI influences the fluctuation of the property market massively as can be seen by the 2009 'Credit Crunch'. The property market is still recovering from the recession which is also a huge factor when reviewing the markets slow recent activity.
The pricing of trade materials and building costs.
Another factor which influences the market is also trade prices. A survey carried out by the Federation of Master Builders (FMB) found that in the last three months of 2019 builders workloads fell into 'negative territory' with around 21% of firms reporting smaller workloads. Material and wage costs have also been predicted to rise over the next six months. Brian Berry chief executive of the Federation of Master Builders comments that “The end of 2019 was a very turbulent period in the UK, both politically and economically, with Brexit gridlock and a General Election."
Conclusively, although Brexit has been a contributing factor on the recent activity of UK's property market it is certainly not the only factor which influences it. Lending rates, inflation rates, as well as the fact we are still in a financial remission from the 2009 recession, also plays a role in the rise and fall of the property market despite Brexits ongoing uncertainty.
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