Home owners and prospective buyers alike want to know: will house prices crash after Brexit? With the huge 20 per cent house price fall prediction continuing to circulate on the web, is it really true that there will be a property market crash once we've left the EU?
As we've reported in our in-depth analysis of Brexit and house prices, while Brexit undoubtedly has affected the property market, the effect has not been uniform across the UK, and Brexit is not the only factor affecting property prices. If we ignore some of the hype that has surrounded discussions of Brexit and house prices, we can start looking at the bigger picture, with more endemic problems surrounding property and the economy coming to the fore.
By far the biggest problem with the UK housing market right now (and for quite some time past) is one of insufficient supply and growing demand. This has been exacerbated by Brexit, with home owners anxiously holding on to properties, reducing the available number of properties further still.
The UK is still massively behind new build targets, which is deepening the housing crisis. For illustration's sake, the UK has twice the population of Canada, but is building half the number of new homes. So, while house prices are unlikely to crash as such after Brexit, the reasons behind this are not a strong economy, but the economy of scarcity.
The other growing problem with housing is yet another growing borrowing bubble, with some economists already predicting a 2008-style recession in the near future. Property economist Andrew Burrell points to an overinflated property market which is at capacity in terms of growth: 'It’s just a matter of 30 years' of falling interest rates, people taking out bigger and bigger mortgages – you’ve now reached the size where it’s probably about as big as we can manage.'
A combination of high levels of debt at low interest rates with stagnant incomes sounds uncomfortably familiar. However, there is one important difference: the UK economy is not currently 'booming', as was the case prior to 2008, so any property market slump is unlikely to come in the form of a spectacular crash. What we're most likely to see is a sluggish property market with slow growth in most areas of the country, and perhaps some further price falls in premium property segments (e.g. central London).