The UK has been involved in the back and forth negotiations with the rest of Europe for the whole of 2019. Unfortunately, it has not been able to secure a deal to enable it to secede from the regional block successfully. The uncertainty about its future has weighed down several markets, among which is the real estate market. While some sectors such as employment and general earnings have seen a growth, there has been a serious stagnation in the real estate market throughout the year.
According to Nationwide study, most houses have only had a value increase of less than 1% for the last 11th months of the year. There has been a general slowdown in the house uptake as companies consider relocating production facilities in the EU countries for fear of tariff rates that may arise. Some of the hardest hit markets are London and South. Unfortunately, according to the market analysts, the values may not leave the sub-one percent rate of growth until it is clear the direction that Brexit is taking.
In the data released by Rightmove, property prices have had the lowest month-to-month increases for the first time in a decade. When compared to house valuation reports just after the Brexit vote in October 2016, prices had jumped by over 12 percent then. Property buyers do not seem to be deterred by the uncertainty in the market. However, most sellers have been put off by price stagnation.
However, there has been an interesting scenario where areas that voted for Brexit are experiencing increase in house prices. Some places in Wales and Ireland that were at the forefront of voting for the cessation of the UK have has year-on-year increases of not less than 5%. One of the highest growing markets in house values is East Midlands where places like Rutland have seen growth by 26.27%. One of the reasons this is so is the expected punitive stamp duty in future house transactions.
What if there will be No Deal?
There is the likelihood that there will be no deal by 31st January of 2020 if the parliament will not have ratified an agreement by then. This would throw the market into a whirlwind that is greater than the case currently. The most likely thing would be that the house prices would fall by about 6%. However, the prices might fall with as much as 20% in the worst cases and some hard-hit markets.
According to the Bank of England, the valuation could go as low as 35% of the current house prices. The greatest degree of hesitation will be experienced as people wait to see how leaving the EU will affect the UK economy.
What if there is Deal?
Boris Johnson is likely to negotiate a harder exit for the UK than his predecessor, Theresa May. The earlier negotiated pact had left the option of the UK remaining in the customs union. However, the Boris route may end up having the UK out of the customs union and tariffs slapped on the UK. Whether a soft or a hard Brexit happens, the housing market will feel the pinch. However, it will not cause house values to go down at once and crash. It will be more of a slowdown as everyone waits to see the real impact of whatever decision will have been made.
Access to Mortgage and House Value
One thing that may affect home valuation maybe the access to a mortgage. If there is a no-deal, banks may be unwilling to lend money for fear of a risky economic environment. This means that that there will be fewer buyers taking up the few houses up for sale, consequently lowering the average prices of homes. With many sellers holding on to their properties, buyers will have fewer options, which will push the mortgage prices even lower.
Base Rate Cut and Its Impact
To add to the Brexit confusion is the likelihood that there would be a base cut following a recent vote by the Monetary Policy Committee. If this goes through, most buyers will pause and see how that will affect the long-term mortgage rates. Some customers may also remortgage their properties in order to take advantage of better rates.
What is the Way Forward for Buyers and Sellers?
The falling of house values across various markets means that it is going to be a buyer’s market. As a buyer, this is a great time to get a good deal in the market. This is because prices are going to stabilise sometime in the near future. Given that mortgages have low-interest rates, it makes the market even better. However, for sellers, the lower value of your home may mean that you may have to wait and see if prices will stabilise so that you avoid selling below the nominal value of your home.