When England voted on 23rdJune 2016 to come out of the European Union, nobody could have anticipated the results yet alone the uncertainty that came with it. The uncertainty that is lingering in England: a disruptive Brexit could lead to a recession. Mark Carney, the governor of Bank of England, is preparing for the worst and suggests of another recession is inevitably if there is No Deal. When recession hit England in 2008, it not only affected people’s livelihood but also the property market. People couldn’t afford to purchase properties due to job losses. The property prices plummeted to all time low and it would prove that it would take a good couple of years for the confidence to come back into the property market. The lack of prosperity which was a direct consequence of the 2008 recession arguably made shops go into administration, banking financial meltdown leads to thousands of British people losing their jobs and inflation rising to all time high.
The B word!
As we wait for Theresa May and government disorderly decision on ‘Deal or No Deal’, the RICS predictions of the housing market for 2019 is to be stagnate. The third quarter of 2016 i.e Post Brexit, there was a clear indication on the figures that the housing prices plummeted unpredictably low. The foreign investors steered away from investing in luxurious properties in London because of the uncertainty and Buy-to-Let property values took a nose dive, as well. One must also bear in mind that even though the EU Referendum was partially to be blamed for the slowdown in the property market, the introduction of the Stamp Duty two years earlier didn’t help either. But if England doesn’t come up with a deal sooner rather than later the house prices could be affected.
The D day: 29thMarch 2019
What could we expect whilst waiting for a decision? The RICS are also suggesting that the rise of interest rates could increase rents especially in London therefore people’s affordability will change, especially the younger generation and families. Vendors are in no rush to put their properties on the market as is weak. When there is a boom in the economy people have confidence to invest their money. According to the Confederation of British Industry (CBI) a No Deal would mean that the gross domestic product (GDP) will shrink by 8% which will mean further thousands of jobs being at risk. British businesses such as car manufacturers Jaguar are already relocating their factories in China (4000) and Slovakia (15,000).
At the current state, there are three options for England: option 1, delaying article 50 which allows extension for renegotiation of the best deals for all respective parties involved. Option 2, accepting a ’No Deal’, which as mentioned, would put the economy at risk or option 3, the people’s choice’; a second referendum which EU will only agree to if the delay of Article 50 takes place.
Whatever the outcome might be it’s about restoring trust and confidence back to the people. When the inflation goes up it goes hand in hand with hike in interest rates which will affect negatively homeowners with the mortgages. As long as there is uncertainty, this has a negative impact the economy which is unlikely to improve prospects for property market values.