More than seven months on since the British people made the momentous and unprecedented decision to leave the European Union, MPs have voted by a majority of 384 to allow Theresa May to get Brexit negotiations under way.
With a weaker pound, higher inflation and cracks in the jobs market emerging, as employers become more nervous about hiring, the fallout from the jaw-dropping outcome from the historic EU vote continues to dominate headlines today.
But on a whole, the UK’s resilient economy continues to beat post-Brexit expectations, with the Bank of England only last week raising its economic growth forecast.
The UK housing market, supported by record-low borrowing rates and a severe housing shortage, has also defied forecasts of doom and gloom following the country’s vote to leave the EU, with house prices across many parts of the country continuing to rise, even during times of economic and political uncertainty.
Property prices were at the forefront of the Brexit debate in the run-up to the EU referendum, with the now former chancellor George Osborne claiming that the value of homes in the UK could fall by as much as 18% following a Brexit vote. However, Osborne’s forecast has so far proved wrong, with prices remaining resilient, illustrated by a robust December.
Scarcity of supply is underpinning the market, as reflected by the latest Halifax data, released last month, which showed that residential property prices rose by 1.7% to an average of £222,484 in December, up from £208,474 a year earlier. The fact that the average price of a home has increased by more than £14,000 over the past year is persistent proof that bricks and mortar are a reliable store of value despite difficult conditions following the Brexit vote.
The triggering of Article 50 could lead to a dip in sentiment among buyers, mindful of the far-reaching political, economic and social ramifications that Brexit may pose for the UK, but our domestic economy will eventually recover, as will the housing market, as the core fundamentals remain the same, including the UK’s strong bedrock desire for homeownership.
The difficulty we have when trying to predict the future, is that we do not know what form Brexit will take. Although some market stability has come in the aftermath of the EU vote, there are some clear signs that there will be further volatility as the UK’s two-year separation from the EU unfolds, which will have an adverse impact on activity levels in the property market.
But the inherent undersupply of housing means that property prices are likely to increase further in the medium to long term, even if there is a dip in the short term.
Stamp duty reform
In many ways, the disproportionately high stamp duty levies introduced in the last two years have done considerably more damage to the market than anything else, including an impending Brexit.
The fact that there is no stamp duty charged under £125,000, then 2% up to £250,000, and 5% up to £925,000, may have helped activity levels at the lower to mid-segment of the housing market, but the 10% levy to £1.5million and 12% above that has had a negative impact at the top-end of the market, best illustrated by the slump in home sales and prices in London’s prime areas, including Fulham.
Analysis by Oxford Economics has found that the changes to the stamp duty system had led to almost 2,000 fewer sales of properties worth more than £1 million and, indirectly, to the loss of 14,000 jobs in the housing market and its associated industries.
In the smartest parts of London, prices have already fallen by up to 12% in the last year, according to some analysis, as high stamp duty levels at the top of the market acts as a bottle neck in the market stopping people in and around Fulham from moving home.
Mortgage interest relief, greater support for first-time buyers, capital gains tax, are among just some of the top issues that property professionals have already outlined among their main requirements, but ahead of next month’s Budget, it is stamp duty reform that is top of the UK property industry’s wish list for when the Chancellor Philip Hammond delivers his statement.
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