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How will the EU referendum affect the UK property market?

Given the recent acrimony in the in/out Hokey Cokey that is the EU referendum, you could be forgiven for thinking that a vote to stay or a vote to leave could trigger recession, World War 3 and an ice age. So we’ve been scouring the less sensationalist parts of the press to try and get to the bottom of what staying or leaving means for the UK – and the Fylde – property market.

It’s worth mentioning from the off that the referendum already appears to be making itself felt. In May, residential property prices in the UK fell by 0.4%. That may not sound like much but it’s the largest single month decline since 2001.

What’s behind the fall? Well, onlookers have been quick to point the finger at the uncertainty caused as we await the ballot boxes to open on June 23rd. There’s certainly recent precedent for this. In the months leading up to the Scottish Referendum in 2014 there was a 10% dip in property sales, with things taking around 6 months to recover afterwards.

It looks as though the same thing is happening now, with more people adopting a ‘wait and see’ approach, meaning that the usual spring surge in sales is likely to come later in the year. Given the experience in Scotland though, you shouldn’t expect someone to effectively flick a switch and have things back to normal come June 24th.

But what will happen in the post-referendum world?

House prices and the EU Referendum – up or down?

There have been plenty of predictions of a falling market post-referendum, based on an expected reduction in immigration. Without the same numbers of migrants to add to the demand, owners may not be able to ask the same prices.

There’s widespread disagreement over the scale of any drop though. The Treasury estimates a 10% – 18% fall come 2018, although other analysts predict far less dramatic drops. How you feel about this may help determine your vote. Home owners won’t want to see their equity diminish. First time buyers in Fylde, on the other hand, will surely welcome a market adjustment.

The leave campaign points out that open borders mean we can never accurately manage supply and demand of housing.

Whatever the outcome, it would be reasonable to expect the Fylde not to be at the extremes – with the greatest effect felt in those areas of the country with the highest levels of immigration (ie London and the South East).

One point that isn’t generally being considered is the bounce that certainty could bring. We’re already in a lull, and the result of the referendum – whatever it is – will at least remove uncertainty. Liam Bailey, Global Head of Residential Research at Knight Frank, believes “market activity might be expected to recover any lost ground quite rapidly.”

Rents and the EU Referendum – up or down?

According the Association of Residential Letting Agents, a vote to leave would mean the population of the UK would be 1 million less than it would otherwise be. That would mean an obvious reduction in demand for buy to let properties, although again, the impact on buying to let in Fylde should be far less pronounced than elsewhere.

Ratings agency Moody’s says the biggest impact will be in London: “Rental inflation would slow down if immigration is curbed [which] could hit landlords’ ability to pay their mortgages on buy-to-let properties if London becomes less attractive to foreign nationals.”

Renters might see this as good news, but supply could also be hit as construction companies find it harder to recruit skilled staff without using immigrants.

Remain says leaving the EU will make it more difficult to build homes and adversely affect the supply of housing stock. Leave says a Brexit is the only way to tackle spiralling rents and housing supply.

Getting a mortgage and the EU Referendum – easier or harder?

Brussels doesn’t have a direct impact on mortgage rates – that’s the Bank of England and the Financial Conduct Authority’s job. As a result, the Council of Mortgage Lenders expects no instant effect of staying or leaving. That said, The Guardian notes that “Bank of England governor Mark Carney and Virgin Money CEO Jayne-Anne Gadhia have all warned that mortgage conditions could tighten because of increased risk and poorer economic conditions.”

Mortgage rates and the EU Referendum – up or down?

The risk to mortgage rates comes from the money markets, and George Osborne and David Cameron have both suggested that Brexit could push up interest rates – good news for savers; less so for mortgage holders.

The Treasury has estimated that average mortgage rates could increase by £1,000 a year.

You won’t be surprised to find that not everyone feels this is accurate. Given the general deflationary trend worldwide, some economists believe interest rates are unlikely to do much at all. The Leave campaign stresses there is no credible argument for mortgage increases.

Come June 23rd…

There’s little certainty, then, but there does appear to be a little more clarity in terms of how your personal situation could be influenced by a vote to stay or leave. Whatever the outcome, if you’re planning to sell your Fylde home, we’ll still be here to help. Get in touch here.

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