15 Jul Does Brexit have an impact on the UK property market?
Does Brexit have an impact on the UK property market?
Does Brexit have an impact to the UK property market?
According to the recent RICS report, “Brexit impasse continues to challenge the market.”
In general, related topics are all over the news in recent times. This started since the announcement of the referendum in 2016. So, are these headlines true? Or are they just a faux?
Truthfully, there is an atom of truth in the headlines.
There is political uncertainty in the country at the moment. This has led to slight disruption in the activities of both sellers and buyers. Basically, a few sellers are not willing to sell at the moment. They are hoping that the prices will increase after Brexit. However, some buyers are quite reluctant about buying properties. These buyers assume that if no one buys properties, their prices will fall.
However, the blame for this trend cannot be attributed to a single factor entirely. We cannot categorically say Brexit is responsible for this trend. Also, it is excessive to assume that the challenging property market is the cause.
We must note two points at this stage.
Is Brexit or something else responsible?
Foremost, there is a misconception that Brexit is responsible for the challenging market. However, this is not true. The challenging market began during the 2008 crash. Since this time, transactions have not returned to how they used to be.
Partially, the new taxes are responsible for the slowdown. Notably, overall stamp duty increased significantly, particularly for foreigner buyers. And this has a telling effect on transactions.
However, personal finances and economic conditions are the major culprits. For many people, these properties are not affordable. This claim is especially through in London.
It costs an average of £619,000 to buy a house in London. This amount is about three times of what you will spend to buy a home in the East Midlands. Comparatively, the home cost in London is thirteen times of average earnings. Nonetheless, it is about seven times of the average earnings in the whole of England and Wales.
Resultantly, there is a decrease in the number of young people that own houses in England. About one-third of ‘generation rent’ may rent a home throughout their lifetime.
The problems with supply play a pivotal role in these challenges. Also, house-building is falling behind the benchmarks that the government recommended.
Is it challenging or steady?
Here is the second point you must note. Many commentators exaggerate the problems in the property market.
Let’s consider the sales market for example. Truthfully, there is a reduction in the activity in the south of England. However, the sales market is still relatively high in other places. This is especially true in the Midlands and North.
The aforementioned regions, Manchester, Birmingham, and other cities are highly affordable. Consequently, many foreign buyers, Londoners relocating, students, and first-time buyers are shifting their attention to these places.
Last year, prices increased in Manchester by 6.6%. This is more than any other places in the whole of the UK.
The effect of Brexit
Using the RICS report, anybody can easily and incorrectly analyse the reduction in buyer’s appetite. Without a doubt, Brexit is influencing the property market. Nevertheless, first time buyers, foreign buyers, and other investors are still buying UK property. This is particularly true in Manchester and other northern cities.
Therefore, whether there is Brexit or not, people will continue to buy a property. Brexit will not stop people from having reasons to change accommodation. These reasons may be the need to buy a first home. They may need to get a bigger home to accommodate their growing families. Or they may want to downsize due to old age. Whatever the reasons may be, people will always move.
Therefore, Brexit is not solely responsible for any decline in the property market.
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