The UK property market was thrown into a state of flux immediately after the Brexit vote in June 2016. More than five years on, has Brexit had a long-lasting impact on the UK property market?
The aftermath in the UK property market immediately following Brexit
Brexit created huge uncertainty in the UK property market. It had ripple effects across the entire country. The market experienced significant changes in both price and demand.
Immediately after the vote, house prices dropped by 2.5% because of the uncertainty caused by Brexit. Buyers and sellers became more cautious about entering the market.
The fall in house prices was particularly pronounced in London, which experienced average price drops of 6.3%. This greatly impacted London’s property market, with many buyers and investors choosing to move their money elsewhere.
Besides price reductions, the number of transactions in the UK property market decreased. The number of transactions fell by 8% in the year following the Brexit vote. The number of first-time buyers also decreased.
It is easy to look at the obvious negative long-term impact which Brexit creates. But considering some of the primary drivers of property, how have they changed?
Net migration fell immediately after the Brexit election. It has increased since 2016. Net migration in 2022 is forecast to be the highest level on record 504,000.
What has changed is the composition of the people who have immigrated to the UK since Brexit. The number of European migrants has reduced. Hong Kong and Ukraine were the two largest groups of immigrants in 2022.
Interest rates have remained relatively static throughout the period immediately after Brexit. In fact, interest rates were reduced throughout the 5 years immediately following Brexit. It is only in the past few months that interest rates have risen steeply.
Average house prices decreased immediately after Brexit. But over the past 6 years price decreases have actually been negligible. In fact, the UK has experienced some of its steepest price growth for many years. Figures published by Nationwide showing the annual percentage change in UK house prices are displayed below.
The number of property transactions is the only significant market indicator that has reduced significantly since Brexit. Over that period, the number of transactions has reduced by almost 20% from almost 1,000,000 p.a. to close to 800,000 p.a.
The reality is that other than the number of property transactions, the real estate market has not significantly suffered from Brexit. The fundamental drivers of house price growth remain, demand outstrips supply. Supply continues to be constrained by slow and arduous planning procedures. At the same time, demand continues to increase. You can read other articles relating the UK property market and Brexit, here.
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