Brexit: How it could affect the property market

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Brexit: How it could affect the property market
While many experts are looking to predict the impact of Brexit on the UK property market, it is fair to say that the impending referendum has already impacted on the market in recent weeks/months. This has because the uncertainty over the vote has caused a fall in property purchases, much in the same way that the market stalled in the build-up to the 2015 General Elections.

The UK property market received a boost in the opening quarter of 2016 due to landlords and investors snapping up property before stamp duty changes came into effect but from this change in April, the market has quietened more so than many would have predicted. The rise in stamp duty has undoubtedly had an impact on the market but the uncertainty surrounding what will happen to the UK after the referendum has also played its part.

With respect to the longer term impact of Brexit on the property market, there are different thoughts and opinions on what will happen.

The Treasury has raised concerns of ‘leave vote’ on UK property market
George Osborne backs the ‘Remain’ campaign and in May of 2016, he issued a statement saying that house prices could fall by 18% in the next two years if the United Kingdom decides to leave the European Union. The Treasury, the IMF and many estate agents have all stated that they believe a vote to leave the European Union will cause instability in the market which could lead to an economic shock.

The idea of house prices falling may not sound too bad for many people who find themselves priced out of the market but Mr Osborne also stated that he believes the fall would also lead to a rise in the cost of mortgages, linked to increased economic uncertainty. If this view is to be believed, houses will become cheaper but the related impact on the economy will negate any benefit or potential to get on the property for many people.

If this scenario transpires, and the sterling is weakened, it could be that UK property is a far more attractive purchase for overseas investors.

Some parties believe ‘leave vote’ will benefit UK property market
Unsurprisingly, there have been people and organisations stating a belief that exiting the EU will have a positive impact on the UK property market. The credit rating agency Moodys believes that a Brexit would lead to a lower level of competition for housing and a drop in rental prices which would be linked to a slow down into the levels of immigration into the UK. This is a highly contentious issue and while there are many people who will be in full agreement with this position, there will be others who believe it is unlikely to come to fruition.

The opinion of what Brexit means to the UK property market is likely to be coloured by the outcome a person or organisation is backing but there are economic arguments to suggest that Brexit could have a positive or negative impact on the UK property market.