EU Referendum. Will house prices rise or fall?
Will house prices rise or fall? We are now only days away from one of the biggest decisions the UK electorate have faced in recent years. To ‘Brexit’ or ‘Bremain’, That is the question. The vote on British membership of the EU has the potential to shape a generation. Both campaigns have been swayed by bias and distorted information, leaving a very cloudy water with many people confused. The Treasury has suggested that the average house price in the UK could be between 10 and 18 per cent lower by 2018 should the UK Brexit from the EU. Credit ratings agency S&P and Fitch and Deutsche Bank’s analysts have all issued concerns that should the UK leave the EU, would cause UK property prices to fall. Furthermore, the The International Monetary Fund (IMF) echoed this sentiment, stating that there is a possibility that the value of UK housing, would fall if they vote to exit the EU on June 23rd. Last month, the Treasury analysis revealed that they anticipate the average house prices could fall between 10 and 18 per cent by 2018 if the UK leave the European Union.
Will house prices definitely fall if the UK Leave the EU?
Contrary to this doom and gloom, other commentators are not necessarily convinced that an Brexit would have such a significant impact. Despite the slowdown in investor appetite in the lead up to the refererndum. House prices are still rising, the Office for National Statistic (ONS) recorded a 9 per cent year on year house price rise in March 2016. Halifax Bank reported that despite the referendum, the UK housing market has shown resilience and remained strong ahead of the EU referendum. In Halifax’s monthly house price index. Halifax said that the average house price actually rose by 1.4% compared to the previous quarter. In a period where it was anticipated the market would soften due to the EU referendum. Taking the UK’s national average house price to £213,472. The annual rate of house price growth remained steady at 9.2%.
But why would house price growth be impeded by ‘Brexit’?
Some regard the strong rhetoric from Camerson’s “Bremain” camp, as scare mongering, in order to sway public opinion of the to vote to stay in the EU. Treasury believe that exiting the EU would cause the cost of borrowing to rise, which would stem the demand for housing the higher cost of lending would be prohibitive to many property buyers, this would lead to fewer property transactions and would impact on house price growth. With a higher cost of borrowing would affect the yields and ROI’s on investors portfolio’s and would make the UK market less attractive as yields could compress. Contrary to that we still have a fundamental housing shortfall. So there will be an organic demand for housing in the UK, which will act as a floor price to provide market stability. If the UK brexit or bremain, we still have a growing number of people living in private rented accommodation and a delivery of new housing insufficient to keep up with demand. It is expected that there are a number of potential property buyers who have held off buying until the vote is concluded and that should we exit there are significant number of overseas buyers poised to jump into the market acting on the falling pound strength.
How can we predict the property price movement?
The UK property market has seen a number of cycles, and that does have a track record on which to measure future expectations. Looking back to the most recent market decline in from January 2008 and July 2009, where prices fell by 16 per cent. That was amidst the global financial crises and decline in the value of the pound. During that period the cost of borrowing did rise, and credit became less freely available as the banks restricted the flow of easy lending. This dovetails with the current opinion of the Treasury’s assumptions. However, this being said, it is important to note that credit terms during that period in the lead up were far less strict than post 2008. So how bad would is it really likely to be this time, will house prices rise or fall? The shortfall of housing available and shortage of new build homes could potentially could help prevent a large property price fall as it would act as a floor under prices in the event of a credit shock. The UK property market has shown greater resilience than other countries, and were less affected by the declines than the US, Spain and Ireland. The average house price in 2008 fell much more sharply than in the UK. That is due to those countries experiencing a building-boom pre financial crisis. This substantially increased the number of new homes which were reaching the market. Contrasting this with the UK housing market where we have not seen any increase in building. We are currently critically under supplied and continue to build under target to meet demand.
EU Referendum. Will house prices rise or fall?
Will house prices rise or fall? We are now only days away from one of the biggest decisions the UK electorate have faced in recent years. To ‘Brexit’ or ‘Bremain’, That is the question. The vote on British membership of the EU has the potential to shape a generation. Both campaigns have been swayed by bias and distorted information, leaving a very cloudy water with many people confused. The Treasury has suggested that the average house price in the UK could be between 10 and 18 per cent lower by 2018 should the UK Brexit from the EU. Credit ratings agency S&P and Fitch and Deutsche Bank’s analysts have all issued concerns that should the UK leave the EU, would cause UK property prices to fall. Furthermore, the The International Monetary Fund (IMF) echoed this sentiment, stating that there is a possibility that the value of UK housing, would fall if they vote to exit the EU on June 23rd. Last month, the Treasury analysis revealed that they anticipate the average house prices could fall between 10 and 18 per cent by 2018 if the UK leave the European Union.
Will house prices definitely fall if the UK Leave the EU?
Contrary to this doom and gloom, other commentators are not necessarily convinced that an Brexit would have such a significant impact. Despite the slowdown in investor appetite in the lead up to the refererndum. House prices are still rising, the Office for National Statistic (ONS) recorded a 9 per cent year on year house price rise in March 2016. Halifax Bank reported that despite the referendum, the UK housing market has shown resilience and remained strong ahead of the EU referendum. In Halifax’s monthly house price index. Halifax said that the average house price actually rose by 1.4% compared to the previous quarter. In a period where it was anticipated the market would soften due to the EU referendum. Taking the UK’s national average house price to £213,472. The annual rate of house price growth remained steady at 9.2%.
But why would house price growth be impeded by ‘Brexit’?
Some regard the strong rhetoric from Camerson’s “Bremain” camp, as scare mongering, in order to sway public opinion of the to vote to stay in the EU. Treasury believe that exiting the EU would cause the cost of borrowing to rise, which would stem the demand for housing the higher cost of lending would be prohibitive to many property buyers, this would lead to fewer property transactions and would impact on house price growth. With a higher cost of borrowing would affect the yields and ROI’s on investors portfolio’s and would make the UK market less attractive as yields could compress. Contrary to that we still have a fundamental housing shortfall. So there will be an organic demand for housing in the UK, which will act as a floor price to provide market stability. If the UK brexit or bremain, we still have a growing number of people living in private rented accommodation and a delivery of new housing insufficient to keep up with demand. It is expected that there are a number of potential property buyers who have held off buying until the vote is concluded and that should we exit there are significant number of overseas buyers poised to jump into the market acting on the falling pound strength.
How can we predict the property price movement?
The UK property market has seen a number of cycles, and that does have a track record on which to measure future expectations. Looking back to the most recent market decline in from January 2008 and July 2009, where prices fell by 16 per cent. That was amidst the global financial crises and decline in the value of the pound. During that period the cost of borrowing did rise, and credit became less freely available as the banks restricted the flow of easy lending. This dovetails with the current opinion of the Treasury’s assumptions. However, this being said, it is important to note that credit terms during that period in the lead up were far less strict than post 2008. So how bad would is it really likely to be this time, will house prices rise or fall? The shortfall of housing available and shortage of new build homes could potentially could help prevent a large property price fall as it would act as a floor under prices in the event of a credit shock. The UK property market has shown greater resilience than other countries, and were less affected by the declines than the US, Spain and Ireland. The average house price in 2008 fell much more sharply than in the UK. That is due to those countries experiencing a building-boom pre financial crisis. This substantially increased the number of new homes which were reaching the market. Contrasting this with the UK housing market where we have not seen any increase in building. We are currently critically under supplied and continue to build under target to meet demand.
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