What the Post-Brexit Property Market Could Mean for First Time Buyers


On June 23rd 2016 the world waited with baited breath to see whether or not Britain would vote to leave the European Union.

Seeing as over half of Britain’s wealth is tied up in property the response to this decision could be life-changing for many people.

On the one hand first-time buyers priced out of Britain’s ever-rising property market hoped that a vote to leave the EU might depress prices just enough to get on the ladder.

On the other hand, even just a small drop in consumer confidence after Article 50 is enacted could shave billions of the UK’s national wealth.

Now the dust has settled, and Britain has voted to leave the EU, the question is what first-time buyers might be able to expect in the foreseeable future.

Firstly, let’s address the subject of house prices – long an obsession for British home owners.

When it comes to property prices two key ingredients are consumer confidence and bank lending criteria.

Research carried out by Wellesley Finance shortly before the EU referendum found some significant concerns among the general public. Their survey suggests that 61% of home owners who predict a fall expect it to take five years or more for prices to return to pre-referendum levels. An astonishing 29% believe it will take ten years or more.

Further polls back up the general negative expectations of post-Brexit Britain. For example, the Daily Telegraph reports that 27% of the population expect prices to fall in the coming three months.

Consumer confidence, it would seem, does not favour the vote to leave.

As it turns out, these expectations may be becoming a reality, especially in the over-heated South East, where average property prices sit considerably above the national average.

So far the decline has been small – just 0.9% according to RightMove – the equivalent of £2,647 on an average home.

But experts are predicting that worse is to come. Bank Société Générale has won headlines recently for claiming that uncertainty over the future of Britain on the world stage could see London property prices fall by 30% or more. They further claim that “given the current ratio of prices to incomes in London, a price correction of even 40-50% in the most expensive London boroughs does not seem impossible”.

Little wonder then that the Financial Times recently reported that price cuts on marketed properties have increased by 163% since the Leave vote, with completions down 43% on the same period last year.

The evidence, right now, seems clear. Falls in property prices have already been experienced – no matter how small – and consumer confidence is low. Just how far prices will drop, and for how long, however, is far less easy to speculate on.

For first-time buyers, of course, this seemingly bad news for existing home owners could come as a ray of sunshine. Falling prices could mean a greater number of renters capable of buying their first property, and still others potentially managing to purchase larger first homes than they first expected.

But what about interest rates? Right now the current Bank of England rate is set at 0.5% – a historically low rate that has been in effect since 2009.

Many pundits expect that interest rates could fall yet further this year, though in a recent vote the BoE voted to retain the current rate.

So how does this affect first-time buyers? Assuming banks continue to lend to property buyers these low interest rates have the potential to mean cheaper borrowing – and hence more affordable monthly mortgage payments. A further drop could make life even more comfortable for Britain’s “Generation Rent”.

While it would be foolish of us to make definitive statements about how Brexit may affect first-time buyers, the evidence does suggest that a combination of falling property prices, and the low cost of borrowing, could open up the market to a new group of first time buyers.

If you’re considering getting on the property ladder in the next few years, now may be the time to start seriously considering your options. Start building up a financial war chest, so that you have the funds available to pounce before the market recovers.

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