While there have been a lot of comments from industry experts that UK property prices will decline if the UK votes for a Brexit, there are some views suggesting prices will fall in the next couple of years whether Britons vote to stay in or out.
In an interview in Business Insider, Jamie Loughead, head of politics at UK bookmaker Star Sports, said he expects UK house prices to fall in 2017 and is already taking bets against that prediction.
“The Brexit effect is a red herring,” Mr. Loughead said. “Sure it would affect some people but domestic customers, who are just looking to buy a home because they need a place to live do not care about waiting until after the EU referendum.”
The Royal Institution for Chartered Surveyors holds a different view. In its recent May survey, the RICS reported that surveyors across the UK noted a slowdown in demand and were predicting house prices could fall in the next few months. Specifically, the RICS report stated that a net balance of 10% more survey respondents predicted house prices across the UK would fall over the next three months than those who thought they would rise. There were also more London-based surveyors reporting a decline in house prices in the Capital in May than those who said house prices were rising in May.
“It is unlikely that we are seeing the emergence of a more affordable market,” said RICS chief economist Simon Rubinsohn. “Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the forthcoming EU Referendum coupled by a slow-down following the rush to get into the market ahead of the tax change on the purchase of investment properties.”
However, Loughead believes there are fundamental imbalances in the UK’s over-heated property market that will lead to price declines further ahead– none of which have anything to do with a potential ‘Brexit’.
"I understand why people think the market will rise because of lack of supply and lots of demand but there are many issues undermining the market and I cannot see any big rises happening this year,” Loughead told Business Insider.
One of those fundamental problems is affordability. Figures from the Office for National Statistics show the average price of a UK home was £209,054 in April, for London that average house price was more than double the UK average at £470,025. According to Fathom Consulting, house prices would need to fall by 40% or “household income grow at ten times its current pace for the next five years, in order to bring the ratio back to balance.”
Neither of those extreme scenarios is particularly likely. However, as has happened in the past, house prices could fall a little, in order for them to become more affordable again. The probability of this increases if demand from investors who appear to be taking a bit of a break from the market in the wake of higher stamp duty fees remains subdued and that lack of demand weighs on prices.
With so much to consider, it’s more difficult than ever to predict what might happen to UK house prices in the coming months. We, among many others will be watching all the news, indexes and developments with interest.