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Will Brexit affect the housing market?

Here we go with the "B-Word" again.


It is the right time to buy and sell property on the Isle of Wight… even with Brexit looming… in our opinion at least.

Let me explain.

Do we have a crystal ball? Are we masters of the tarot? Are we great seers from ancient legend staring into the minds of the oracles?

Unfortunately not, no.

However, there are some things that can guide our feelings about what might happen in the Post-Brexit Apocalypse or Utopia.

When we finally get a decision on whether we are leaving with or without a deal, and whether or not it will be Bozza or Jezza to hold our hands through the aftermath, there is absolutely no doubt that the UK market place will be affected in some way.

There are so many variables to consider to even begin to understand it all. And remember, this is only our opinion.

So lets take a look at the worst case.

There have been reports that house prices could drop by 6% or even drop by a full 20% in a no deal situation. In the meantime, Halifax are saying that house prices have increased up 0.4%. Only a year ago, the National papers reported that Ryde prices were up 10.2%. So what does that all mean??

Well… nothing… yet.

The truth is, nobody really knows. It is a little like watching the stocks and shares rise and fall. It is impossible to tell without some thorough research.

There is no doubt in the minds of most property experts that house prices are going to get hit by a no deal Brexit. But the property market has always been nearly impossible to predict.

The truth is, that if the housing market reacts to a NO-DEAL Brexit in the way that is expected, then we will see a drop in house prices of about 6%. So a house worth £200,000 is going to be valued at around £188,000. But there is always a chance that panic and uncertainty could create a higher price drop… between 10-20%. It is not out of the question that property currently valued at £200K could be worth no more than £160,000 in the post Brexit carnage.

DON’T PANIC – this is the worst-case scenario based on total loss of confidence in the housing market and a NO DEAL Brexit. So these variables would have to all be worst case to see this affect. And remember this is based on human sentiment as much as anything, which is always difficult to quantify. It is worth noting that any of these worst-case scenarios are deliberately modelled by the UK experts to ensure that the financial system is prepared for any eventuality. It’s never as bad as they say.

A recent rise of mortgage approvals is just one example of just how unpredictable this all is, and we have absolutely no historical actions to compare and base our assumptions on. Every cloud definitely has a glimmering silver lining. The mortgage rates are at an all time low, and stamp duty relief for first time buyers makes this the perfect time to get a foot on the ladder.

Right now, any bump in the economy could delay any possibility for the Bank of England to raise its interest rate until a safer position is achieved, otherwise there would be too much risk to millions of mortgage holders across the country.

So what’s the point? Why are we even having a guess?

Well, a lot of this is based on London. A city that benefits from huge foreign investment. So it makes sense that our capital would be negatively affected by the Brexit War. London is also suffering from a large downturn in prices due to the eventual bursting of the overpricing bubble, due to years of above-inflation growth.

Regardless of the political outcome or turmoil, the UK is not going to stop being a desirable place to live, both from foreign visitors and local factions. We like living here, and people still want to move here. This is even more relevant to popular holiday destinations such as the Isle of Wight.

And while locally there is a continued shortage of supply, the property prices will continue to be held up by the buyer need. It is a sellers market, and one that will continue throughout the playground of Brexit.

The truth is, no deal Brexit is not going to do anyone any favours, but the property market has already been affected since the referendum.

Investment buyers are more cautious than ever, pausing to make big choices until the uncertainty has been cleared up, but there are buyers out there.

People are still looking for their forever homes, some people still know that a 5% yield on property rentals is still considerably better than the 0.6% of an investment ISA and for a first time buyer, if you are paying £600 an month rent anyway, with current interest rates the way they are, then why not pay off a mortgage?

The property market has always been cyclic. It rises and it falls and it rises again.

People will always need somewhere to live, to settle and to call home. In our opinion anyway.

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