House prices in the UK are currently rising at the slowest annual rate since 2012, according to data from the Office for National Statistics (ONS).
In July 2019, the average UK house price was £233,000 – that’s just £2,000 higher than the same month last year. House prices increased by 0.7% in the year to July 2019, the lowest rate since September 2012 where price growth was just 0.4%.
So how is Brexit impacting house prices? Well, although we haven’t actually left the European Union yet, the uncertainty caused by the 2016 Brexit vote has caused a fall in consumer demand in the housing market. The uncertainty of leaving the European Union has led many to delay or change major investment decisions such as buying houses – similar to businesses, some of which like Nissan and Jaguar Land Rover have opted to move some of their operations and investment plans overseas.
The fall in demand has been more prominent in some areas of the country than others, leading to the overall annual rate of change in UK house price growth.
- House prices have been falling in London for 17 months in a row, with prices falling 1.4% in the year to July. London is still the most expensive place in the UK to purchase a house though – the average house in the capital will set you back £478,000.
- The North East is the cheapest place to purchase a home in the UK – a house in the region will cost you around £127,000 on average. House prices in this region have fallen by around 2.9% over the last year.
- By country, Wales had the largest house price growth in the year to July 2019 – with growth at 4.2%, down slightly from 4.3% in the year to June. House price growth in Scotland sits at around 1.4% for the year to July, 0.3% in England and 3.5% in Northern Ireland.
With consumers being more cautious over purchasing houses in the current economic climate, it is thought that housebuilders may reduce the supply of new housing in some regions, according to this report.
Accountancy firm KPMG said in a report earlier this month that changes to house prices would somewhat depend on the type of exit the UK takes from the European Union. If a deal is struck with the bloc and the UK leaves on October 31, KPMG expects house prices to rise by 1.3% in 2020. A no-deal Brexit could see house prices fall by up to 7.5% in 2020, according to the report.
Is it good that prices are falling in some areas? Well for first-time buyers who went to get on the housing market, the fall in some house prices could be good news. However, wage growth in Britain remains low, so it still remains difficult for young buyers to get on the property ladder. For existing homeowners, the fall in prices may be bad news, especially if they wish to sell their property and move elsewhere. The news is also bad for the construction sector and its workers, with there being dampened demand for houses.
According to a survey by Experience Invest, 55% of UK property investors are awaiting the outcome of Brexit before investing and 59% are awaiting the Autumn Budget. The Autumn Budget is when the government could announce financial proposals, such as changes to Stamp Duty Land Tax, for example. The Budget also includes forecasts for the economy.
In August, the ONS announced the first fall in quarterly GDPR in over six and a half years and this has sparked fears of a possible recession (two consecutive periods of negative growth in GDP).
Brexit can certainly be seen to be having an impact on the economy, but the exact extent of this is debated and some believe the impact of Brexit will only be short-term – this again could largely be determined by the type of exit the UK makes from the EU.