Should you sell your home before Brexit?
The departure of the United Kingdom from the European Union, popularly known as “Brexit”, is due to happen on March 29, 2019, regardless of any deal struck between the British government and Brussels over the future relationship between the two sides. Negotiations, albeit strained, aimed at an amicable split continue, but the possibility of a ‘No Deal’ Brexit, which would mean Britain leaving the European Union without any formal agreement, still exists.
According to Chairman of the Bank of England, Mark Carney, residential property prices could fall by more than a third in the event of a ‘No Deal’ Brexit. A poll of 30 market analysts, conducted by international news agency Reuters, similarly suggested that there was a slightly better than one-in-three chance of major downturn in house prices in the wake of a ‘No Deal’ Brexit.
A so-called ‘Hard’ Brexit, which would sever many of the existing ties between Britain and the European Union, would also be bad news for house prices, according to most experts. In this scenario, Britain would leave the single market and customs union and, instead, seek a free trade deal with the European Union. Negotiating trade deals typically takes many years so, in the interim, any trade barriers will affect wages which, of course, underpin house prices.
If Britain loses access to the single market, some companies, notably financial institutions in the City of London, would lose their ability to service clients in the European Union overnight. Consequently, they would need to move at least a proportion of their workforce to other financial centres, such as Frankfurt or Paris, to continue their operation. In addition, the collapse of Sterling, not to mention the uncertainty surrounding their eventual status in Britain, has already led some European workers to leave the country. This relocation, while regional and relatively small-scale, may well have a knock-on effect on house prices.
Of course, house prices depend on many different factors, including supply, demand, inflation and interest rates, so accurately predicting the future impact of Brexit is nigh on impossible. On August 1, 2018, the Monetary Policy Committee of the Bank of England voted unanimously to increase the Bank Rate by 0.25% to 0.75% and, regardless of the ramifications of Brexit negotiations for the British economy, any further increase(s) will subdue the housing market.
In 2017, house prices grew by a healthy 4.9% but, in 2018, the general consensus is that uncertainty over Brexit will increasingly as a brake on house prices; they will continue to rise across the country, but only by modest percentages, between 1% and 5%, depending on whose estimate you choose to believe. As to the question of whether you should sell your house before, or after, Brexit, frankly only time will tell if the experts are correct in their predictions for the housing market. A recent poll by Bishop’s Move, the largest family owned removals company in the country, suggested that 13% of buyers and sellers had cancelled a housing transaction because of economic uncertainty over Brexit.