House prices rose 0.2% in June according to the Nationwide house price index. However, this may be the calm before the storm and now the vote to leave the EU has taken place, things could quickly change…
For many, one of the key questions asked before and after the EU referendum is how it would affect property prices. Figures released as part of the Nationwide house price index show that property prices actually rose 0.2% in June, the same percentage rise which was seen in April and May.
However, in light of the UK voting to leave the EU, which came as a surprise to many analysts, and fears about possible growing unemployment adding to the general uncertainty the vote has caused, housing demand is now expected to fall, which could, in turn, mean lower house prices in the immediate future. Nevertheless, there are still differing opinions among many economists about just what effect the Brexit vote will have on the property market in the coming months.
Chief economist at IHS Global Insight, Howard Archer, was pessimistic about the immediate future following the UK’s vote to leave the EU, saying: “Housing market prices and activity appear to be at serious risk of an extended market downturn. It’s likely to weigh down heavily on consumer confidence and economic activity and that isn’t good news for the property market.
The outlook for London is harder to forecast because, as Nationwide’s chief economist Robert Gardner, says: “Landlords and overseas buyers here play a much larger role in the market and it’s not clear how the outlook for demand from these sources is going to be affected.”
Ian Thomas, director of LendInvest, doesn’t think the Brexit vote will affect the property market as much as some other analysts believe it will. He says: “Although the result was a surprise to many, the fundamentals won’t suddenly change the UK housing market. There is still massive demand for housing which far outweighs supply and people still need homes to live in whether we’re in the European Union or not.
“Brexit may even create opportunities as the result of a cooling in the property market with lower house prices bringing in new business from first-time buyers and others who are now able to afford property they couldn’t afford before.”
Meanwhile, the governor of the Bank of England, Mark Carney, has indicated that interest rates will be cut this summer. As part of economic stimulus measures taken by the Bank of England in response to the Brexit vote, cutting the current 0.5% interest rate would be good news for mortgages that are linked to the Bank of England base rate.