Founder of Stepladder, www.joinstepladder.com
Back in the summer of 2016, the United Kingdom took the historic decision of leaving the European Union. In doing so, it chose to leave behind the relative stability of the EU, in favour of an independent, yet uncertain future – much like a single ship veering away from a fleet.
In the time since the referendum, we’ve been treated to commentators from every corner of the political spectrum, all attempting to make sense of what it will actually mean for the UK.
The realityis Brexit is uncharted territory.
One of the most prominently discussed topics has been housing. Some believe that Brexit will have an adverse effect on home values – with a potential change in immigration policy reducing demand from abroad, and the entire withdrawal process bringing general uncertainty into the market.
This is a view shared by the Bank of England. With the housing market being so finely balanced, if this prediction turns out to be a correct one, some homeowners could be pushed into negative equity. But, as prices have risen for so long, and the dream of homeownership seemingly unattainable, there is a school of thought that suggests that Brexit could end up helping others onto the property ladder.
Before we work out if this is true, we need to remind ourselves of the problems that first-time buyers face. At the centre of the housing crisis is an issue of affordability. Wages have risen at a low rate in the decade since the 2008 Financial Crisis, and this growth has been far outstripped by the rise in property values.
Furthermore, the tighter lending regulations have made it more difficult for first-time buyers to access finance without significant deposits at the ready.
Our own data illustrates that homeownership appears no less of a priority for prospective first-time buyers than reported in the past. We found that 81 per cent of participants in our focus groups were actively saving for the specific purpose of a home deposit.
Demand for housing remains high, and this ensures that prices for first-time buyers homes can be expected to remain so, too.
Unfortunately, Brexit will not do enough to address these imbalances, so its effect on house prices may be limited. Prices could actually rise. This is a pattern that we’ve been seeing in the property market.
If we exclude London, which is exposed to global labour flows and financial services, Land Registry data shows an annual price rise across every English region, with house values in Yorkshire rising by 3.4 per cent.
With the country failing to build enough new homes to satisfy demand, prices tend to be pushed up further. There is a skills gap in the construction sector and with housebuilders having a more difficult time hiring workers from abroad, they may be forced to build fewer homes.
The economic uncertainty created by Brexit could perpetuate this under-building dynamic.
Finally, we believe Brexit’s effect on first-time buyers reaching their goal will centre mainly around its impact on banks’ health and mortgage availability. Specifically, how much the enticing prospect of having low interest rates for even longer is counteracted by institutions applying even more rigorous lending standards.
But, given that interest rates remain low, there has been no better time to have support and guidance on the journey to home ownership.