What effect will Brexit have on house prices?
By Sarah Davidson For Thisismoney.co.uk
PUBLISHED: 13:39, 11 April 2017 | UPDATED: 14:50, 11 April 2017
House prices across the UK have risen by an average of 20 per cent since 2006
While absolutely no-one can predict the future, the experts are all delivering pretty much the same message: keep calm and carry on.
‘Monthly fluctuations are typical of our housing market and today’s slight dip in mortgage approvals is testament to this,’ says Jeremy Duncombe, director of adviser firm Legal & General Mortgage Club.
‘It is important that we aren’t distracted by these nuances and instead focus on the opportunity borrowers have to significantly save money on their mortgage deals in our current low interest rate environment.’
House prices are a function of supply and demand. The supply of homes in the UK is tight – we aren’t building enough new houses to keep up with population numbers and people aren’t selling their existing homes in their droves.
This is, broadly, what is supporting house prices at the moment.
On the flipside of this equation is demand. People are desperate to get onto the housing ladder, perceiving that their personal wealth will grow because average house prices have been growing for the past decade.
Nationwide’s index shows that house prices across the UK have risen by an average of 20 per cent since 2006. Demand isn’t just about wanting to buy however, it’s also affected by whether people are able to buy. This is where restricted mortgage availability, inflation, static wages, and unemployment become critical as these all have the power to stop people from buying.
While these things have all remained at healthy or low levels since the financial crisis, excepting wage inflation which has been broadly flat, there are fears that Brexit will cause some people to lose their jobs.
Without an income, borrowers can’t get a mortgage or repay the one they have. With inflation high and the pound weakening, businesses have less money to invest providing new jobs.
This puts pressure on demand and sellers who need to sell, have to accept lower prices to get the deal done.