With the EU Referendum debate picking up pace as we see the public head out to vote this Thursday (23rd June 2016), all eyes are on the property market.
London has already seen the majority of the impact of the upcoming uncertainty, as overseas funds are hesitant to invest in the capital’s property until a decision has been made. As the preferred area for overseas buyers, the capital has seen a drop in property prices not only because of the upcoming EU vote but also because of a new property tax regime. However, house prices elsewhere in the country are continuing to climb, according to sources. Rightmove reports that asking prices have increased 0.8% to an average £310,471 in the UK, while London’s asking prices have dropped 0.2%.
Views in the Flatman Partnership offices are mixed. If Britain leaves the EU there may be less immediate growth in the economy and therefore no need to defend growth by increasing interest rates. However, would we see the reverse effect if we vote Remain?
House prices may indeed fall through uncertainty if we were to leave Europe. The majority of economic experts believe Brexit would trigger a fall in the pound impacting on the value of homes. A reduction in migration may also lead to less demand for Britain’s strained housing market. Only 142,890 new homes were built this year, far below the Government’s 250,000 target. Less demand would mean more availability, therefore cheaper houses for first time buyers and lower rents.
But a contradictory view suggests that those with mortgages, and those looking for their first mortgage, could suffer. Base interest rates have been unchanged for seven years, the lowest ever at 0.5%, which is obviously an advantage to home owners with a mortgage. The predicted fall in the pound after a Brexit, which Treasury research suggests could see house prices could drop by between 10 and 18% by mid-2018, may also see mortgage repayments increase as the unstable economic conditions.
As i reports “An average mortgage could rise by £920 a year, and by £810 for first-time buyers, making it more difficult for them to get on the housing ladder.”
However in this situation nothing is fixed and there is a great deal we don’t know. If we were to stay within Europe, would we see increased growth leading to a rise in interest rates? Would the demand on the property market increase though immigration? We’ll be monitoring the situation with great interest as the week progresses.