The ‘Brexit Effect’: House prices suffer after EU referendum
The Bank of England has taken drastic action to try to help the UK economy as the impact of Brexit begins to take its toll.
Governor Mark Carney has slashed interest rates from 0.5% to 0.25%, a historic low, just six weeks after the UK voted to leave the European Union. Despite this, and a number of other measures, he still forecasts a gloomy outlook for the UK economy.
The bank reduced its overall growth prediction for 2017 from the 2.3% that it predicted in May to 0.8%, its biggest cut to growth forecasts since they began in 1993.
The housing market is unlikely to be sheltered from that wider economic struggle. Indeed, Halifax has already reported a 1% fall in prices in July, the first month of trading since the June 23 ballot.
In London, Foxtons has blamed Brexit for a 42% drop in profits and says the slump is unlikely to ease throughout the rest of 2016 while economists at the French bank Société Générale said prices could fall 30% in the capital and even halve in the most expensive boroughs.
S&P Global Ratings has also issued research which suggests that nearly every market in Europe will see house price growth on the back of historically low lending rates except the UK, which it says will see prices fall back as a result of the Brexit vote.
The EU Referendum in June arrived at a time when prices were already starting to cool due to the Government’s increase in Stamp Duty. The rush to beat the new rates, which kicked in in April, meant that there was a surge in activity in people snapping up buy-to-let homes in the early months of 2016.
Coming on the back of this buy-to-let cooldown, the uncertainty in the aftermath of the EU vote is unlikely to lift the temperature.
Elliott Castle, managing director of WeBuyAnyHome, said: “Brexit had an immediate impact on the property market. A large number of people are withdrawing from property purchases and property chains are collapsing. The market is seeing significant price reductions and there has been a slow down on new properties entering the market.”