AS Brexit negotiations continue, you may wonder how the exit from the European Union will affect UK house prices.
Will first-time buyers be able to snap up cheaper properties if values fall, or is there no need to worry for existing homeowners?
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We explain how the property market could be affected by BrexitCredit: Alamy
The Sun has spoken to experts to find out how the property market could be affected once the UK leaves the EU on December 31.
It comes as the housing market has swung back from the first coronavirus lockdown, which effectively saw it shut for a seven-week period this spring.
House prices have since hit record highs following a temporary stamp duty holiday on properties worth up to £500,000, which has boosted demand.
Last week, Halifax said typical house prices rose from £237,834 to £253,243 between June and November – marking the strongest run of growth over five months since 2004.
Meanwhile, Nationwide Building Society reported an annual rise in house prices of 6.5% for November, the highest since January 2015.
Mortgage approvals surged to a 13-year high after coronavirus lockdown
The housing mini-boom has also sent the number of mortgage approvals soaring to a new 13-year high after lockdown.
But with Brexit continuing to add uncertainty and the stamp duty holiday set to end in March, could the boost be short-lived? We explain what you need to know.
How did the EU referendum affect UK house prices?
After Brexit was first voted for in 2016, there were fears a house price crisis could be around the corner.
House price growth then slowed following the EU referendum, but it still grew and has since increased even further.
The average UK house price in June 2016 – the month of the EU referendum – stood at £213,927, according to Land Registry figures.
Three years later, in June 2019, the same figure had risen to £230,292.
The chart above shows the annual rate of change in UK house prices each year since 2014.
As you can see, the rate of house price growth plummeted in the year after the referendum but is now back above June 2017’s level.
How will Brexit affect house prices?
How Brexit could affect house prices depends on whether the UK leaves the EU with a deal or not.
If there’s a No Deal Brexit, the uncertainty could have implications on decisions by home buyers, said Jeremy Leaf, north London estate agent and a former RICS residential chairman.
However, he also added to The Sun: “If property prices are going to soften, a No Deal Brexit won’t be the only factor behind this.
“It is just as likely to be further lockdowns, economic gloom including the withdrawal of the stamp duty concession, as well as rising employment.”
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
Paula Higgins, founder of the HomeOwners Alliance, agreed and said any impact of No Deal Brexit will be overshadowed by the more immediate factors.
She said: “History has shown that a No Deal Brexit may not have as much impact as we think it could.
“For instance, overseas investors will be attracted to a weak pound, even with the overseas surcharge of 2% coming into effect in April.”
Anthony Codling, founder of property website Twindig, said housing transactions are more likely to fall rather than prices if Brexit affects the economy.
He said: “After the Stamp Duty Holiday, home buyers are likely to take a wait and see approach to moving home.
“If homebuyers perceive it is business as usual then we would expect the housing market to return to normality and it is unlikely that house prices will fall.
“If a Brexit deal or a Brexit No Deal leads to a rise in unemployment or more importantly a rise in the fear of unemployment, we would expect housing transactions to fall and remain at a lower level until the Brexit dust has settled.
“It is unlikely in our view that house price will fall significantly as a result of Brexit.”
Meanwhile, the Office for Budget Responsibility (OBR) gloomily predicted last month that house prices will fall from the second quarter of next year when the stamp duty holiday ends.
It expects prices to drop by 8.3% by the end of the year, and then for them not to recover until the end of 2022.
In other words, it’s impossible to know for sure what will happen to the property market next year but it’s worth to keep the various views in mind if you’re looking to get on the property ladder.
Will Brexit affect mortgage rates?
The Bank of England (BoE) dropped the base rate – its official borrowing rate – to 0.25% in the wake of the EU referendum to stave off a recession.
Lenders use the Bank of England’s base rate as a benchmark for how much interest they charge on mortgages.
If Brexit causes the pound to drop, the BoE may decided to hike interest rates which will increase your monthly outgoings.
However, due to the pandemic, the BoE is unlikely to hike the rate in the near future. Instead, it has actually hinted at negative interest rates.
Mark Harris, chief executive of mortgage broker SPF Private Clients, told The Sun he expects a “a minor negative impact at worse” if there’s a No Deal Brexit.
He added: “Lenders remain keen to lend and rates are competitive – there are no signs of that changing anytime soon.”
While Mr Codling agreed and said: “Mortgage rates are low and are likely to remain so and will not put downward pressure on house prices.”
Still worried about changes to your mortgage interest rate? You can avoid potential bill hikes by locking into a low fixed-rate deal.
In the first month after the stamp duty holiday was introduced, house prices went up by 1.6% – or £3,770 – on average, Halifax has found.
The tax break is positive for sellers who can seize the opportunity to cash in, but buyers risk paying over the odds if the house price boom doesn’t last.
In November 2018, the Bank of England warned that house prices could crash by 30% in a No Deal Brexit.