What's going to Brexit mean for house prices?

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With the united kingdom having finally left the EU, we check out what’s became of house prices since the referendum in 2021, and explain whether Brexit could still modify the property market this year.

Brexit jitters have long posed a threat to house price stability, with concern over whether an offer could be agreed and also the prospect of alterations in interest rates bringing uncertainty for consumers alike.

In 2021, it was exacerbated through the COVID-19 outbreak, which saw two cuts to the Bank of England base rate in the space of eight days, in addition to a seven-week shutdown of the property market.

The government’s move to cut stamp duty in July 2021 brought the home market back again, but questions remain over what will happen to house prices once the tax break ends later this season.

We’ve analysed the home market before because the Brexit referendum and spoken to experts in the estate agency, mortgage and buy-to-let sectors to create the inside guide on what’s happened so far, in addition to predictions for house prices in 2021.

Note: This short article was recently updated in March 2021. For the latest news on the property market, check out our story around the impact of coronavirus on house prices.

 

 

What’s happened to house prices since the Brexit vote?

House prices stagnated for a while following the referendum in June 2021. However, that was fairly normal for that season: prices generally grow in spring and plateau next few months, a design which was repeated in 2021.

In late 2021 and early 2021, prices began to fall quite quickly as uncertainty around Brexit continued, before rising steadily over the months prior to the overall election in December.

The COVID-19 outbreak brought a volatile here we are at the housing industry in 2021, however the release of pent-up demand after the spring lockdown saw house prices rise.

This mini boom was buoyed through the government’s temporary cut to stamp duty, which has now been extended in England, Northern Ireland and Wales.

Average UK house prices

The graph below shows how house prices have changed because the referendum, using data in the Land Registry’s UK House Price Index.

Are house prices rising?

Looking at year-on-year house price change over the long term could be a useful way of understanding what the market’s doing.

The chart below shows the annual rate of alternation in house prices every year since 2021.

As you can observe, the rate of price growth plummeted around after the referendum everywhere in the UK except Scotland, which remained flat.

Two years on, in June 2021, year-on-year price growth had improved in each and every UK nation except England.

By June 2021, the speed of growth had slowed overall to some UK average of 1.01%.

The newest data (for June 2021) shows annual house price growth had settled around 3% over the UK.

This complex picture shows how difficult it is to attract a direct link between Brexit and changes to accommodate prices.

Transaction volumes since the referendum

Another way to judge the health of the housing industry is to take a look at transaction volumes, meaning the amount of property sales in any given month. A lower quantity of sales could mean market uncertainty, that is triggered by events for example an election or referendum.

Interestingly, the referendum itself didn’t appear to have much impact on transaction figures. At the begining of 2021, however, transactions were quite sharply down when compared to same months last year, before settling at just under 100,000 monthly throughout the entire year.

2021’s figures were heavily affected by the COVID-19 outbreak, with the market shutdown resulting in just 40,000 transactions going through in April.

Since the re-opening from the market, however, transactions happen to be rising quickly. Sales recovered to normal levels in September, before hitting a higher of 125,000 in December 2021.

(The spike you can observe within the graph below was caused by investors rushing to complete their purchases prior to the 3% buy-to-let stamp duty surcharge arrived to force in April 2021.)

Housing transactions before and after the EU referendum

The graph below shows the number of house purchases (of more than lb40,000) recorded previously five years, using data from HM Revenue and Customs.

What’s the marketplace like for sellers?

A widely used measure of how the marketplace is performing for sellers is how long homes are taking to secure a buyer after being placed on the market.

The chart below, which utilizes data from Rightmove, implies that properties have generally been taking longer to market since the referendum in 2021.

It takes longer to find a buyer at the start of each year. In January 2021 it took typically 77 days – the highest figure recorded since the referendum.

The data for 2021 was heavily influenced by the market shutdown, prior to the stamp duty cut saw properties sell much more quickly within the final quarter of the year.

In November 2021, properties took just 49 days to become marked ‘under offer’ or ‘sold susceptible to contract’, the cheapest figure recorded by Rightmove to date.

Brexit house price predictions: exactly what do professionals think?

We’ve looked at what has already happened, but what is coming up next? We spoke to a selection of industry experts to find out the things they believe the near future holds for the UK property market in 2021.

Note: These predictions were created before the extension to the stamp duty holiday, that was announced on 3 March 2021.

The large financial company: ‘Buyers remain confident and therefore are benefiting from low mortgage rates’

David Hollingworth, associate director of communications at L&C mortgages, says: 'It's impossible to completely dissociate the point of leaving the EU, and then any ongoing uncertainty in the economy it might generate, from the ongoing pandemic.

'Since the marketplace reopened after the initial lockdown, there's been extremely high demand, so it's hard to point to confidence being hit. The stamp duty holiday may have helped drive activity, so questions remain over what happens after it leads to March. When the end from the transition period has an effect on the broader economy it might affect activity, although an offer being reached should calm consumer sentiment.

'Mortgage rates remain competitive, and this will help boost borrower affordability and confidence. Availability has also been improving for those with smaller deposits in recent weeks, which supports too.

'If the demand continues because it is and that we begin to see restrictions ease there's little to suggest that prices will be hit, however the recovery from the pandemic carries an uncertain outlook and then any disruption from Brexit could still add to the uncertainty.

‘Overall, home buyers have been showing they remain confident enough to maneuver throughout a pandemic and also to take advantage of low home loan rates. They are able to also fix those rates to be able to protect against any potential future fluctuation and many are taking the opportunity to lock into reduced rates now.’

The estate agent: ‘It’s vital that the property marketplace is supported’

Mark Hayward, chief policy adviser at Propertymark, says: 'Brexit continues to add another layer of uncertainty towards the housing market alongside COVID-19, but because housing has been a priority in recent months, we remain optimistic.

'The stamp duty holiday provides much-needed affordability and relaxed a punitive financial tax on home movers, however, we continue to put pressure on government to increase the holiday as failure to do this might have unintended consequences on the housing industry.

'As we're yet to the full impact of the Brexit deal on people's lives, it is important that the property marketplace is supported wherever possible through measures such as a stamp duty holiday extension.'

The property pundit: ‘It’s unlikely we will see much price inflation in 2021’

Kate Faulkner, housing expert and founder of propertychecklists.co.uk, says: ‘The demand which pushed up prices by 4% in 2021 was driven by people who were suppressing from moving before the pandemic struck – partly due to the fear of Brexit’s impact on house prices. In the second a part of 2021, demand was brought forward because of people being unhappy during lockdown or the stamp duty savings available.

‘For 2021, we're prone to see three main kinds of movers driving demand. The very first is going to be those moving to some better home, using the desire still driven by lockdown experiences. The second will sadly be a rise in the three D’s – death, divorce and debt – driven through the awful consequences from the pandemic. Finally, there will be the pent-up demand from individuals who wanted to buy during the last year with a smaller deposit.

‘There might be a lull in activity in April and May when the stamp duty cut isn’t extended, however i believe there's enough interest in 2021 to provide one other good year for transactions. However, due to the increase in prices this past year, its unlikely we will see much price inflation in 2021, and we may even see slight falls reported.

‘In truth, unless Brexit causes severe harm to our economy over the future years, its unlikely it'll effect on the home market.’

The buy-to-let expert: ‘The government must provide clear guidance for landlords’

Chris Norris, director of policy and practice in the National Residential Landlords Association (NRLA), says: 'I think it's fair to say that many landlords have given little, if any consideration, towards the impact the next stages of Brexit may have on their own businesses over recent months given the immediate challenges presented by the pandemic. However, it certainly hasn't gone away and may pose additional risks.

'The issues didn’t really change throughout 2021. There is still little details about what status EU citizens may have in respect of the to rent in the united kingdom when the transition period expires. We realize that until 30 June right to rent checks will continue in the same manner as they do let's focus on EU citizens, along with those from Switzerland, Norway, Iceland and Liechtenstein. However, we're still no clearer about the longer-term.

This means that landlords with tenants who're EU citizens or those who have a tendency to cater to seasonal migrant personnel are unsure by what they need to do in order to comply with their obligations. Likewise, if EU nationals have their freedom of motion into the UK restricted, some landlords may face a difficult time finding tenants. It is crucial though the government publishes clear guidance for landlords as soon as possible to make sure clarity for landlords and their tenants.

'The end of the transition period may have an impact on housing demand. If fewer EU nations see the UK being an attractive place to live this might reduce demand in the margins of some markets. Additionally, whether it increases market uncertainty some investors risk turning to 'safer' bricks and mortar for his or her investment.

‘Overall chances are it will be very difficult to differentiate the result from the pandemic response and also the resultant downturn in the economy in the ramifications from the UK's new relationship using the EU; whatever form that may take.'

This article was initially published on 1 November 2021. Copy, charts and quotes have been regularly updated since then to mirror newly released data and also the latest Brexit news. Additional reporting by Stephen Maunder.

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