Brexit's Impact on the UK Housing Market

As it currently stands, with the December election looming, there is understandably a lot of uncertainty about Brexit. Across the UK, there is a lot of concern surround living, economy and housing particularly. Although nobody knows what is going to happen after Brexit, there are many predictions based on what has happened so far. Generally, nobody knows what will happen once we leave the EU which is why there is so much uncertainty around the housing market. For many, housing is a big concern and one which has been mentioned as a priority in general election debates. There are big promises from each political party regarding housebuilding; with some focusing on private building and others on social housing. Homelessness is a massive issue in England, both visible and hidden; with a massive million families stuck on council waiting lists. Last decade there were 30,000 more social housing homes built than in this decade. More than anything, the issue arises when it comes to affordable housing; it seems across bigger cities there is a real focus on ‘luxury apartments’ but a lack of affordable housing in the suburbs of cities such as Manchester. The Federation of Master Builders is calling for political parties to make housebuilding a national infrastructure priority which would mean more affordable housing being build and more work for the construction industry.

Impact of a No-Deal Brexit

One of the biggest concerns across the country, and the EU no doubt, is what is going to happen should there be a no-deal Brexit. Whilst many MP’s are opposed to a no-deal Brexit, it will be the only solution should a deal between the UK and the EU not be reached. This is causing concern amongst leaders in business and financial experts as it produces uncertainty about things such as trade across countries. According to Which?, accounting firm KPMG has predicated that house prices could fall by around 6% if a no-deal Brexit was to happen; up to 20% in a worst case scenario. Similarly, the Office for Budget Responsibility said it could lead to house prices falling by 10%.

Falling House Prices

Since the 2016 referendum, house prices have continued to grow, yet at a lower rate than they were prior to the referendum. Which? reports that year on year the rate of house price growth plummeted the year after the referendum and two years later, in 2018, despite having improved across the UK, it remained the same in England. This is concerning for many and points towards a decrease in house prices should a no-deal Brexit happen, and even if we leave with a deal it is still a concern for many. However, it can be argued that this cannot be correlated to Brexit and it is just an overdue market correction following an unlikely fast growth rate. On a brighter note, the slowdown in price increase could actually be helpful for thousands of first-time buyers looking to get on the property ladder.

House Price Predictions

Although it is difficult to know exactly what is going to happen post-Brexit, experts have made some predications and subsequently offered advice to those looking to buy or sell during this time of uncertainty. An uncertain situation like Brexit can often cause people to panic and make rash decisions but the Which? mortgage expert warns against this. Despite the situation, you should still treat buying or selling a home as the same. It is important to consider all of your options when buying in this uncertain time rather than jumping into something just because it seems like the best option in a bad situation; for example don’t jump into a fixed rate mortgage just because it is offered as a seemingly better option.

It is also important to know that just because there is a lot of uncertainty in the air that it isn’t necessarily a bad time to buy. If you’re looking to buy now for the long term, you shouldn’t worry as it is likely that in five years’ time the housing market should be improving again. However, if you’re only looking for a short-term property, you shouldn’t look to buy now as you’re at risk of losing out on your investment. Currently, there’s a reduction in both transactions and houses on the market due to the ambiguity of Brexit and the upcoming December election. Once the election has passed and it is clear what the next steps are this may pick up again.

Housebuilding

According to the FMB, the new-build market has remained relatively strong in recent months however for it to remain this way it is essential that post-Brexit the industry can access skilled labour form abroad to ensure housing targets are met. Therefore, in terms of new builds, the uncertainty is surrounding labour supply. In their programme for the government, the FMB is calling for 1.5 million new homes to be built, for the government to free up public land for housing and to break it into smaller plots for small builders. However, for this to be possible, we still need to have an active skilled labour supply from abroad.

The FMB’s Chief Executive; Brian Berry, said that the current housing crisis should be a priority in the December election as we’re still not building enough homes. The housing crisis in the UK has led to an affordability crisis and over-crowding and the election should be viewed as a chance for parties to detail how they will turn it around. He states that small builders are ready to help the new government in building new homes and upgrading older ones, particularly in terms of energy efficiency.

Impact on the Construction Industry

One of the biggest concerns for the construction sector surrounding Brexit is about labour shortage. It is no secret that the UK’s construction industry is heavily reliant on migrant labour and with such uncertainty surrounding free movement there is a lot of worry about how the sector will cope with a suspected lack of skilled workers. In return, the skills shortage could lead to higher project costs.

One of the biggest outputs of the construction sector is housebuilding and with a shortage of workers, it is likely the sector will struggle to meet housing targets. As new builds are to remain a priority it does mean that there should be a lot of business for the industry, but the challenge remains with how they will cope with the demand.

The Tool Hire Sector

With continuing demand for new housing and plans to continue housing growth in the UK post-Brexit we anticipate positive growth in the tool hire sector as demand increases for housing projects. Whilst labour in the construction industry may struggle, we expect tool hire to continue at a good rate and with investment in education for new and skilled workers we hope the industry as a whole will continue to thrive. Unfortunately, all anyone can do is make predictions and the outcome of Brexit remains uncertain.

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