Four and a half years after the public voted to leave the EU, the Brexit deal came into effect on the 1st of January 2021. Here’s how it might impact the UK housing market.
Following months of negotiations, the UK and EU agreed a Brexit deal on the 24th of December. This laid out the trade agreement and the level of ongoing European involvement. The deal came into effect on the 1st of January as the withdrawal agreement came to an end.
Since the EU referendum, uncertainty has been at the forefront for many sectors. Having dealt with political and economic uncertainty in recent years, the UK housing market has largely remained resilient. This has continued even throughout the coronavirus pandemic.
House prices unlikely to be impacted in the short term
It’s difficult to know exactly how Brexit will impact the UK housing market. However, with a deal in place, many feel Brexit is unlikely to have much of an impact on the sector in the short term. House prices will likely be more impacted by the country’s economic recovery from COVID-19 and job uncertainty.
If Brexit causes significant job losses, this could lead to a slight drop in house prices. Many in the property industry are already forecasting house price growth to slow down in 2021, but some argue that prices will not fall – or at least not by much. If house price growth does slow down, it could prove to be a beneficial time to invest in property.
What will happen with housing market demand?
An article by This is Money states many homebuyers decision to purchase property is based on employment rates and mortgage availability. Mortgage interest rates have been at record lows due to COVID-19. Some are even predicting the Bank of England could lower the base interest rate into negative territory.
The number of mortgage products on the market are increasing as lenders gain confidence, making it easier for homebuyers and property investors to secure mortgages for their property purchases. On the other hand, if interest rates increase, the rates are still at low levels. This makes it a good time to lock in competitive deals.
With the stamp duty holiday in place until the 31st of March, demand in the UK housing market will remain strong throughout the beginning of the year. And as homebuyers have reassessed their home priorities in the wake of COVID-19, moving home will likely remain at the top of many people’s agenda even after the stamp duty holiday ends.
Job uncertainty, which will likely lead to more people renting for longer, is expected to have a more significant impact on the housing market than Brexit. The furlough scheme is set to end at the end of April. This is when many are predicting unemployment levels will be the highest.
At this point, transaction levels are expected to drop. Some buyers and investors will likely wait and see how the economy and housing market fares. This is Money also states that some people believe if people are confident enough to purchase property during a global pandemic, they will also be confident to buy property post-Brexit.
Renewed confidence could keep the market moving
There is renewed confidence with two COVID-19 vaccines approved in the UK. As more vaccine doses become available, consumer confidence could return to the wider economy and housing market. This will keep the market moving. And moving forward, few people will likely use Brexit as a reason not to invest in property.
The UK housing market has remained strong since the sector’s reopening after the first national lockdown in 2020. Because of its strength, the sector will likely not be too negatively impacted overall by Brexit. There is still uncertainty ahead with how the Brexit deal will impact the economy and housing market. However, the market will likely remain resilient.