In 2008 the UK experienced one of the deepest recessions and financial crises for more than 20 years. The housing market crash destroyed consumer confidence and caused housing demand to plummet.
Over the past eight years demand has slowly worked its way up to reach an all time high with London property prices rising 10 per cent year on year. This was mainly down to the interest from foreign investors from countries such as Russia, China and India but with the UK voting to leave the European union in June this year, I fear history is about to repeat itself.
London house prices have already felt the aftershock of Brexit by dropping up to 15 per cent in some areas, when compared to 2015. This can only be expected to continue because consumer confidence has once again taken a hit. The current level of uncertainty has already affected our currency and exchange rates, which means what was once a vibrant housing market has suddenly seen the sand it was built on slowly washing away. The question is whether this will have a ripple effect in the housing market and whether it will start to flow into areas outside London.
Home ownership in Manchester recently hit an all time low dropping from roughly 72 per cent to 58 per cent. I believe this is most likely going to be the result of Brexit for the UK in the long term, we will see a fall in homeownership rather than a drop in house prices.
This isn’t the only crisis Britain is facing in the wake of Brexit. After discussing the UK housing market with a number of national house builders, it is clear that we will not be able to keep up with the demand for housing in the coming years. Britain relies on skilled workers from overseas and with stricter border controls, it will become much harder to find the right people with the right skills. We can only expect this to slow down the supply of housing, which is another factor that will increase house prices.
I expect the UK will eventually become accustomed to ‘generation rent’ and as a country our housing market will start to resemble that of Germany, where home ownership is renowned for being low.
The immediate effect of Brexit will see a drop in house prices, particularly in central London. In the long term there is going to be an under supply of housing, which will mean prices will return to what they were pre-Brexit, if not higher. So it’s good news for home owners, but for those looking to get on to the property ladder, it’s going to be tough.