Should we stay or should we go? Ahead of June's EU referendum, here's a taster of what could be in store for the housing market if the nation backs Brexit.
Picture it. After a nail-biting lead up to the EU referendum on 23 June, the nation votes to leave Europe. Then we’re in uncharted territory.
It’s difficult to forecast exactly how a Brexit vote would shape the housing market. But here at Zoopla, we’ve put our thinking caps on to provide at least a taster of what the brave new world might look like.
But, as we know our readers will point out, for every potential impact of Brexit on the housing market, there is also an argument to the contrary.
As Ray Boulger, senior technical manager at mortgage broker John Charcol, explains: “The suggestions by both camps as to what will happen if we vote for Brexit are pure guesswork, even though they all claim 'this or that' will happen.
“You might take a view on whose guesses are most credible. But the bottom line is that we'd be in uncharted territory which could result in unexpected consequences – some good and some bad.”
Now we've got that straight, here are 8 ways that Brexit could impact the UK property market:
1. Potential buyers and sellers choose to stay put
Current uncertainty in the housing market could persist beyond ‘the vote’ if the UK backs Brexit. The time it would take for the Government to negotiate fresh deals and relationships could put the brakes on short- to medium-term housing activity. In other words, if people don’t need to move, they won’t.
2. More pressure on housing stock from ‘last-ditch’ immigration surge
Britain leaving the EU could prompt it to tighten control of its borders. And this could result in a last-ditch immigration surge, putting short-term pressure on housing stock. Already, figures show that migration is responsible for a third of social housing shortages but the private sector would also be impacted.
However, in the long-term, if immigration was to reduce under Brexit, demand for housing could cool, according to RICS.
3. Less demand for high-end property
If major international firms relocate their headquarters outside of the UK in the wake of Brexit, a whole raft of highly-paid executives will follow suit. This could result in lower demand for high-end property, particularly in London and the south east, fuelling price reductions already underway. (See how much these top-end central London homes have been reduced.)
4. Fewer foreign students looking for digs
Changing enrolment rules for universities and colleges under Brexit, could put off international students from coming to the UK to study. This would have a knock-on effect on the demand for property – which would spell bad news for student landlords.
5. House prices head south
UK house price growth is already tailing off. But some market commentators believe Brexit could trigger price falls as uncertainty prevails and demand for housing weakens. Online agent eMoov, for example, estimates that a vote for Brexit would see 5% wiped off current property values.
And Chancellor George Osborne warned on ITV's Peston on Sunday programme: “I’m pretty clear that there would be a significant hit to the value of people’s homes."
6. Higher mortgage repayments
Bank of England Governor, Mark Carney warned earlier this year that interest rates could rise if Britain backed Brexit. Having become accustomed to record-low rates of 0.5% since 2009, many homeowners with mortgages could face much higher repayments.
Osborne added on Peston on Sunday that higher mortgage costs would hit first-time buyers trying to get onto the housing ladder.
7. More expensive new-build homes
Any limits on immigration under Brexit could result in fewer construction workers from overseas. And, if demand for labour begins to outstrip supply, costs will rise for the UK’s house builders and developers. This extra cost could be passed onto the buyers of new-build homes.
8. More cash freed up to invest in our own infrastructure
If the UK was no longer required to make financial contributions to the EU under Brexit, the extra cash could be put towards boosting our own new infrastructures and development, according to RICS – such as high speed train service HS2. Our Zoopla figures show that house prices along the Crossrail rail link have already soared 52% since construction started in May 2009.