No Deal Brexit + house prices: what will happen?

Property experts say London and Northern Ireland would bear the brunt of a no-deal property market slump

No Deal Brexit and house prices
(Image credit: Getty)

How bad would a no-deal Brexit really be for UK house prices? The answer is: quite bad, and potentially very bad if you live in areas that are more dependent on EU trade. As part of our UK house price forecast back in January, property expert Kate Faulkner advocated calm and common sense, explaining that not all that happens to the property market is due to Brexit. However, more recent developments have seen the UK move ever closer to a chaotic exit from the EU, with unpredictable consequences. 

While Tory rebel MPs won a crucial victory on Tuesday night that could see a delay to Brexit if a deal isn't worked out by the current deadline of 31 October, the possibility of a no deal Brexit remains very real, and with it, a high chance of property prices taking a nose dive later this year and throughout 2020.

According to accountants at KPMG, a conservative estimate puts the potential fall in house prices at 5 or 6 per cent, while London and Northern Ireland would see something closer to 7 per cent, due to their heavier reliance on European trade. However, a worst case scenario could see house prices plummet by as much as 20 per cent, leaving many home owners in negative equity. 

No deal would be particularly bad news for those who have recently taken out a mortgage on their first home with a very small deposit. Conversely, if you are thinking of buying your first home and have a good deposit ready, 2020 could be a good time to buy, deal or no deal. 

If the UK exits the European Union with a deal in place, house prices are estimated to rise slowly, by about 1.3 per cent, so buying a house should still be cost effective next year. 

There is, however, a far bigger potential issue that would affect both home owners and potential buyers if we have a no deal Brexit. Back in February, Bank of England governor Mark Carney issued a stark warning against no deal, saying that it would pretty much 'guarantee' a 'sharp' economic decline. This would undoubtedly affect people's earnings and jobs, which would make qualifying for and paying a mortgage even harder.