As October 31st – and the UK’s potential Brexit date looms ever closer – many businesses, it seems, feel as they are sitting on a knife edge. None more so than the property industry which is directly affected by the UK’s economy and, of course, the interests of overseas buyers.
So, what in the event the UK leaves as it seems Boris Johnson is prepared to do, without a Deal? Brexit has already affected property prices, with the increasing value of UK homes having slowed in recent years – and in London and the South East the affect has been reversed, with many owners seeing a decline in the value of their property. Sales too have fallen in recent months as people wait to see the fate that a possible Brexit could bring them and the country as a whole.
When it comes to the effects of a No Deal Brexit on the property industry, leading accountancy firm KPMG have already thrown their hat into the ring and predicted an average six per cent fall in value in the property. However, that may go as high as 20 per cent if things turn really ugly.
Supply/demand issue will keep property from plummeting
Having said that, any fall is expected to be short-term, particularly has No Deal Brexit will almost certainly cause an instant economic crisis, leading to a reduction in house building. The latter will, of course, keep supply low and demand high meaning house prices won’t fall too much in the long term. By ‘long term’ that could mean prices not picking up again until 2022. Certainly, the Office for Budget Responsibility said this summer that a No Deal Brexit could result in prices plummeting by 10 per cent by two year’s time.
Northern Ireland property to take the brunt
Not surprisingly, considering the rows over ‘the border backstop,’property prices in Northern Ireland will be affected the most. According to KPMG they could fall by 7.5 per cent in 2020. London property too, would suffer in a No Deal Brexit scenario, with a fall of seven per cent.
Initially though, the drop won’t be quite as big with prices falling two per cent in Northern Ireland initially and 4.8 per cent in London. As for the rest of England and Wales the drop in property values should be around 2.2 per cent by the end of the year.
What a Deal and No Deal Brexit means in financial terms
According to the Daily Mail’s website This is Money the resulting drop in property values in the event of a NO Deal Brexit (compared to a Deal Brexit) could result in some London homeowners losing as much as £31,000 in the value of their property. Next worst hit would be property owners in the South East with a difference of up to £ 28,000. In the West Midlands the difference would be £14,000 and in Yorkshire & The Humber it’s £14,000.
One thing is for sure, come October 31, there’s going to be a lot of financial calculations being done in the property sector throughout the UK.
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