Prime Minister Theresa May has officially triggered Brexit; Britain’s departure from the European Union. As we await the full impact of the nation’s removal from the rest of Europe to take effect within the next two years, experts observing the housing market closely have revealed what has been happening in the property sector, and also forecast what could happen in future. The Telegraph has noted in a recent article that house prices have fallen for the first time this month since June 2015. Let’s explore why.
The article reports that the fall in house prices may have been due to the current economic and political climate Britain has found itself in. Brexit has officially started, and this has caused uncertainty and instability in all markets, including the housing market. Thus, this has meant that there is an air of caution in households in Britain when it comes to purchasing property. Building society Nationwide has revealed that house prices decreased by a monthly 0.3%, compared with a rise in February of 0.6%. This has been the first month-on-month drop since June 2015, when prices fell by 0.1%. Assessed annually, this means prices were 3.5% higher, which is the weakest increase since August 2015. the article notes that these figures have conveyed to expects that house prices have fallen short of expectations, as they predicted a rise of 0.4% this month, and an annual growth of 4.1%.
The British Banker’s Association noted last month that mortgage lending slowed down due to a combination of high house prices and weak demand from buy-to-let landlords following the increase in stamp duty. Howard Archer, an economist from IHS Markit, commented: ”The housing market is being increasingly affected by the increasing squeeze on consumers and their concerns over the outlook.” This echoes the uncertainty mentioned earlier that Brexit brings with it. Mr Archer goes on to say: ”Elevated house price-to-earnings ratios are likely to weigh down on housing market activity and house prices. However, a shortage of supply is likely to put a floor under prices.”
The article also highlights data taken from the Department for Communities and Local Government (DCLG) of the latest English Housing Survey shows that property ownership fell to 62.9% last year, the lowest level on record since 1985. In the 25-34 age group, research shows just 38% of people own their own home, while 56% of 35-44 year-olds are homeowners, down from 74% a year ago. In another statistic, 1 in 5 households in England are in privately rented accommodation, which is up from 12% a decade ago.
Since the referendum for Brexit in June last year, the slump in the pound has pushed up inflation, and together with the slow down in wage growth, this has had an effect on spending power in households. This may be the forecast for the next two years as Britain begins the gradual process of the exit from the EU, and possible may be the picture for the foreseeable future. Experts wait to analyze the market with closer scrutiny as this process happens.