Each day seems to bring a mixture of news from Brexit negotiations depending upon which newspapers you read. On one hand the UK government is unorganized, while on the other, European counterparts seem a little softer behind the scenes. The reality is that nobody knows how Brexit will pan out, will Brexit even be completed and what impact this will have on the UK housing market. However, could Brexit turn out to be a short-term godsend for UK first-time buyers?
UK house prices
While so far there has been no fall in UK house prices there is no doubt that growth is more subdued today than it has been for many years. Over the course of the volatile Brexit negotiations we could actually see negative growth in the UK house prices but this is not certain. Many first-time buyers will be hoping that the market stagnates and even falls back in the short to medium term so they can eventually achieve their dream of climbing onto the UK housing ladder.
If, as expected, UK house prices do stagnate in the short to medium term there are more than enough mortgage opportunities available for first-time buyers. Despite the Bank of England threatening to increase UK base rates in the short term it would appear there has been yet another U-turn by Mark Carney, the governor of the Bank of England. So, low base rates for the foreseeable future, relatively low mortgage rates and a stagnant UK house price market could play into the hands of first-time buyers.
The key for many first-time buys looking to climb onto the property ladder is wage inflation. If wages do start to increase at a faster rate than house price growth then this should in theory bring more first-time buyers into the market. It is difficult to say whether wage inflation will return rate and impact the affordability factor of UK housing but time will tell.
On one hand we have concerns that the UK employment market could be hit by short to medium term Brexit concerns. On the other hand, a significant reduction in European immigration could hit certain areas of the UK employment market and potentially lead to competition amongst companies looking for employees. This situation would be perfect for first-time buyers, new employment opportunities and wage inflation, but we shall see.
Perhaps the biggest thorn in the side of UK first-time buyers will turn out to be overseas buyers who have seen a major increase in their spending capacity due to the fall in sterling. There is evidence that overseas buyers are investing heavily in the UK housing market despite concerns about Brexit. If this continues then it could diminish hopes of house price stagnation in the short to medium term. Whether the UK government will be brave enough to introduce new regulations, as we have seen in Canada, to reduce the impact of foreign investment in the UK housing market remains to be seen. Yes, this would benefit first-time buyers but historically overseas buyers have helped to support the UK property market.
Concern, confusion and first time buyers
There are reasons to be optimistic for first-time buys in the UK and indeed Brexit could turn out to be a short-term godsend assuming an acceptable long-term agreement can be reached with the UK’s European counterparts. The short term risks of investing in UK housing could also see house price growth restricted and, if wage inflation does increase, perhaps, just perhaps, more first-time buyers will be able to enter the UK market. The option is to wait for government assistance but many buyers have been waiting decades for this!