At this moment in time UK house prices are holding up relatively well compared to the doomsday predictions of 18 months ago. The only market which is showing real concern is London where house prices have fallen as concerns about the financial sector and London economy continue to grow. In reality London house prices have outperformed the rest of the UK for many years now and some experts believe that the recent fall in London house prices is simply a controlled deflation of the house price bubble.
It is difficult to say with any real confidence in which direction the UK housing market will move in the short to medium term with so much confusion surrounding Brexit. However, it does look as though UK house prices are the dam which is holding back growing concerns about Brexit.
Is the UK electorate starting to turn?
Despite the fact that the UK government is adamant Brexit will proceed as instructed by the UK electorate back in 2016, the European Union seems determined to appeal to those voters who are now wavering. Indeed just last week we saw a direct appeal from the European Union suggesting that the UK would be “welcomed back with open arms” if the Brexit decision was reversed. At this moment in time there is no indication that the decision will be reversed or indeed that the UK electorate will get a second referendum. However, are house prices the key to continued support for Brexit?
No short-term hit
Despite doomsday predictions for the UK economy and the UK housing market immediately after the Brexit referendum, we have seen no real reduction in the UK economy or UK house prices. If we look outside of London, house prices are still expected to show an increase in 2018 although this will be a little subdued compared to recent times. According to government figures UK employment is improving, the economy is standing its own ground and the UK authorities are deep in negotiations with international partners regarding trade deals after Brexit.
The reality is that the UK electorate has yet to feel any financial pinch as a consequence of Brexit. Employment prospects have certainly not changed for the worse, indeed there are signs of improvement, and with interest rates still extremely low there is little pressure on mortgage payments. In many ways the current and future prospects for the UK do depend upon house prices remaining relatively stable. However, what if prices do start to drift back?
It is highly likely that if we see UK house prices start to drift in the short term a number of people who are currently wavering over their original vote to leave the European Union may well switch camps. At the end of the day the UK electorate wants stability and a clear vision going forwards as well as protection of their assets of which their home is integral. It may well be time for the UK government to roll back some of the excessive property related taxes of recent years, invest more heavily in local economies and follow through with promises to increase the number of newbuilds for first-time buyers.
The reality is that any confidence which can be injected into the UK housing market will help to shore up support for Brexit in these difficult times. On the flipside of the coin, a dip in UK economic activity and a fall in house prices could precipitate a rush to the exit door and create something of a self-fulfilling prophecy for those predicting a doomsday scenario. The government can influence the housing market in the short term but ultimately it will be the power of investors, both domestic and overseas, that dictate house price movements and ultimately the success or failure of Brexit.