We are edging ever closer to the UK leaving the European Union, with plenty of actions being taken ahead of the March 2019 deadline. What effects will Brexit have on the UK’s housing market once the dust has settled? Bespoke kitchen designers, DM Design, investigate..
The RICS headline price balance falls
A survey of UK chartered surveyors carried out across the summer suggested that the UK’s housing market as a whole weakened in June. In fact, the Royal Institution of Chartered Surveyor’s (RICS) headline price balance dropped to +7 per cent in that month — down considerably from the +17 per cent recorded in May, and also the weakest reading made by the organisation since one was made straight after the crucial Brexit vote in June 2016.
While on a national level, RICS found that 44 per cent of surveyors who were questioned for the study cited domestic political uncertainly as being the key factor for the current state of the market (remembering that the UK’s snap general election took place in June and led to Theresa May failing to secure a majority), 27 per cent acknowledged Brexit as being the main factor.
Simon Rubinsohn, who is the chief executive of RICS, commented: “Perhaps not surprisingly in the current environment, the term ‘uncertainty’ is featuring more heavily in the feedback we are receiving from professionals working in the sector.”
Different stances on the state of the UK’s house prices
It is difficult to determine if the UK’s housing market is going through a tough patch or is taking the uncertainty of Brexit in its stride though.
This is because a recent house price index carried out by Halifax revealed that average house prices fell by 1 per cent in June. On the flip side, an index from Nationwide concluded that a 1.1 per cent rise was recorded in the same month.
Adding to this is the fact that an Office for National Statistics report on house prices recorded a price growth of 5.6 per cent in the year up to April 2017 — which is an increase from the 4.5 per cent recorded previously.
A survey by Rightmove has provided even more positive statistics for the UK’s housing market, by revealing that the number of house sales agreed was up by 4.6 per cent in June 2017, when compared with those recorded in June 2016.
Miles Shipside, the director and housing market analyst at Rightmove, pointed out: “A year on from the shock referendum result and subsequent dent in activity levels, the fundamentals remain strong.
Low unemployment, low interest rates, strong demand and historic undersupply of homes are mitigating any wobbles in confidence and as a result nearly half the properties on the market, over 45 per cent, have sold signs slapped across them.”
Concerns north of the border
While it is hard to predict where the UK’s housing market is going, an economic outlook report published by PwC in July has painted a worrying picture for Scotland.
This is after a forecast in the report suggested that both the Scottish economy and its housing market are taking hits following lower business investment and weak consumer confidence that has developed due to uncertainty surrounding Brexit.
As a result, the report has predicted that Scotland will witness 1.2 per cent GDP growth in 2017, and then 1.1 per cent growth in 2018. While this can be seen as a positive as it will mean that the country will avoid a recession, it will be below the UK average if the forecasted figures are accurate. A growth of 1.5 per cent in 2017 and then 1.4 per cent in 2018 is being predicted for England, for instance, while Wales can expect a 1.3 per cent growth followed by a 1.2 per cent rise.
Lindsay Gardiner, the regional chair for PwC in Scotland, believes that the report should raise concerns for the whole of the UK though. He explained: “While some may see concern at the fact Scotland and Northern Ireland [Northern Ireland is forecasted for 1.1 per cent growth in 2017 and then 0.9 per cent growth in 2018] are at the bottom in terms of GDP improvement, there is actually very little separating most of the UK.
This year the best growth we expect any region – except for London – will see is 1.5 per cent, and then 1.4 per cent next year. Where concerns should perhaps be focused is around wage growth as many are offsetting limited growth through increased borrowing – which may have a longer-term impact via interest rate rises or employment downturn.
It’s too early to speculate on how the Brexit talks are going to impact growth, however current exchange rates have some offsetting benefits for net exports.”
Phil Spencer’s views on the UK’s housing market
The idea that it’s too early to predict how Brexit will affect the UK’s housing market is echoed by property expert Phil Spencer, who is famous for hosting Location, Location, Location.
Interviewed by Express.co.uk about how he sees house prices across Britain altering once the nation has left the EU, the real estate agent underlined: “There will be some changes, but they’re not going to happen overnight — not in two years time. We’ll not be sure what affect it will have for a very long time. For now, we just need to keep calm and carry on.”
The property guru was also keen to point out that everything is relative when it comes to house prices, to the point where “if your house goes up in value so does the one you want to buy. So, this isn’t necessarily a bad thing”.
Will UK homeowners move to home improvements?
As we have established, there is a lot of uncertainty regarding the UK’s housing market. If homeowners across the nation were to become more sceptical about upping sticks and selling their properties though, could they find the idea of making home improvements more appealing?
The VELUX 2017 Home Improvement Survey certainly appears to suggest as much. According to the research, close to 60 per cent of UK homeowners were planning on carrying out home improvements in the six months from April 2017 — estimated to be worth £50.89 billion.
There has also been a 12 per cent increase in the number of homeowners planning home improvements when compared to the same period in 2016, while a third of those involved in the study said that they were considering improvements due to a reluctance to move.
When it comes to the types of home improvements being looked into, 71 per cent said that their main focus was on making cosmetic changes, while a quarter said that they wanted to invest in flooring and lighting, and another quarter was keen to overhaul their home’s kitchens and bathrooms.
Grant Sneddon, the product manager at VELUX, commented: “Whether it’s by creating an extra room, converting a loft, building an extension or replacing a kitchen or bathroom, it appears that homeowners up and down the county are realising the potential of their homes and choosing to improve or to add to the space they have, instead of moving to a different property.”