How will the triggering of Article 50 affect house prices?

According to the Financial Times, in the week that Article 50 has been triggered, the most searched Google term following the phrase "How will Brexit affect…" is house prices.

There is widespread concern that the economic fallout from the UK leaving the EU could undermine housing confidence.

So far, the FT says, that is how things are playing out: HMRC figures show transaction levels in the second half of 2016, after the Brexit vote, were down nine per cent on the same period in 2015.

In general, anecdotal evidence says a slowdown in foreign buyers in high-value markets such as London has added to a reduction in prospective landlords moving into the market following the rise in stamp duty last April.

The capital has apparently been hardest hit, with some indices citing negative growth overall, dragged lower by the most expensive boroughs.

But other studies show growth continuing. Hometrack featured London house prices rising 5.3 per cent year-on-year last month, the lowest figure since May 2013 but still steady and positive.
 

This is the story in recent months: slower transaction volumes and declining growth, but house prices still edging steadily higher.

Experts predict growth across the UK this year could fall to around two per cent.

The main reason prices are continuing to rise, albeit slower, is the ongoing shortage of housing, which means demand being propped up by low interest rates is outstripping supply.

It is possible the Brexit process could lead to a sharp drop in economic confidence that would upset the apple cart, but otherwise this trend looks set to continue.

​Lucian Cook, head of residential research at Savills estate agents, told the London Evening Standard: "[Brexit] may well make the Bank of England reluctant to increase interest rates, despite the recent increase in inflation.

"This will preserve affordability and points to a low turnover market, with little upward or downward pressure on prices.

Article published by Theweek.co.uk - 30th March 2017