There’s not a day goes by without someone asking me one of the three great existential questions of the time: who will win the Ashes?; can anyone stop Manchester City this year?; what will Brexit do to the housing market in Yorkshire. Well, the answers to the first two questions are easy (England and Liverpool…I live in hope) but the last one is a real teaser!
The question is challenging analysts and economists across the land. I tend to think about the question more as a request to provide guidance both up to ‘Brexit day’ on 31st October and beyond. The first thing to say is that the market has changed ever since the original referendum vote. The rate of house price growth has slowed markedly across the UK, although Yorkshire has fared better than many areas. We’ve certainly doing better than our friends in London, who are looking at another year of price declines. Another key measure of the market’s health is transaction volume. Here, the uncertainty of Brexit has triggered a substantial drop in year-on-year transactions of 16.5% (source HMRC) and the time to sell a property has moved up markedly to around 60 days. The heady days of properties selling within days of going on the market seem a long time ago. Anecdotally, selling prices are now rarely exceeding guide prices and sometimes below guide prices, occasionally quite materially.
Interestingly, there is some evidence that transaction volumes are a little higher in July and August, perhaps as buyers look to complete deals by the end of October. Some common sense advice would be that if you want to buy and sell in the relative calm of pre-Brexit, then time is pressing. If you’re in the middle of a sales process, now is the time to give a gentle nudge to all involved parties (agents, banks and solicitors) to keep ahead of Brexit. Unfortunately, if you’ve not yet had an offer accepted on your property or you haven’t even got your house on the market, then you’re lurking right by the exit door of the ‘last chance saloon’. Remember, even if you have an offer accepted, there is no certainty of the deal going ahead until exchange of contracts. Until that point, the buyer or seller could withdraw at any time. The time taken between an offer being accepted and exchange of contracts varies markedly from area to area but six weeks would be viewed as fast virtually everywhere.
So, what will happen to the property market after 31st October? Now, that’s a question! There are as many possibilities, as views expressed, but a consensus does seem to be emerging. Any form of ‘deal’ would probably be beneficial to the market and would lead to a ‘relief rally’ in both prices and transaction volumes. The trickier question is what will happen in the event of the famous ‘do or die no deal’. I still remember the 1970s when virtually all scientists had concluded that smoking was bad for you (there’s always one to disagree). Now, almost all commentators would agree that a ‘no deal’ would damage the property market, again measured by price and transaction volumes. Something to think about as we queue for petrol or tour pharmacists looking for our medication. A Reuters poll of housing experts indicated that 85% of respondents believed that prices would fall in the six months after a no deal Brexit, but by relatively modest amounts (3% national and 10% in London). We still have some factors supporting house prices including the ongoing shortage of houses, recent wage gains and very low mortgage rates (currently). The direction of mortgage rates is one of the most difficult things to predict. Mortgage rates usually tie quite closely to the Bank of England (BoE) base rate. This might rise if the BoE decides to try and support a collapsing sterling (holidaymakers abroad will already have noticed this early Brexit effect), but rates could also fall if the Bank decides to try and ward off recession and stimulate a struggling economy. Either scenario is possible, but Mark Carney, the Governor of the Bank of England did tell the Commons Treasury Committee that a no-deal Brexit was likely to lead to reductions in the base rate.
The future after the 31st October seems very uncertain and there’s no way of getting around that. We can all be certain that in the event of a ‘no deal’ Brexit, buyers and sellers alike will be faced with a unique property market with some significant challenges. There seems little doubt that the initial uncertainty would make both buyers and sellers equally cautious. This would likely lead to a very quiet period in terms of sales activity, possibly linked to a modest decline in prices. Sellers may well struggle to find a motivated and proceedable buyer and buyers could bemoan the lack of choice in a subdued market. If a ‘no deal’ does happens, I promise to come back and give some advice on how everyone should adapt to a post Brexit Autumn and avoid a gloomy Winter.
Ian Foy Partner, Source Harrogate – The Property Finders
www.sourceharrogate.co.uk 01423 788759