While negotiations have yet to begin, the UK is likely to remain a member of the EU until 2019 at the earliest. This is fuelling speculation around the near and long-term future of the nation’s economy, especially following the news of a general election. This is particularly true with regards to the property market, particularly as this sector continues to struggle with a chronic imbalance between supply and demand.

How Will Brexit Impact Directly on the Property Market?

Let’s start with a basic assertion; the spectre of Brexit and the UK’s departure from the EU will have little direct impact on house prices in most parts of the country. This means that recent trends within the market are likely to continue in the near-term, with demand continuing to outstrip supply while intensified new-build schemes restrict the exponential rate of price growth that characterised 2016.

Stagnating wage growth and increasingly stringent lending regulations will also cap prices, meaning that although they will continue to grow incrementally across much of the country they will do so at a noticeably slower rate. In this respect, the triggering of Article 50 appears to have coincided with a slight decline in property market growth, with fewer homes being listed for sale and transaction levels set to fall by 18% by the end of 2018.

Will Brexit Have an Indirect Impact on the Property Market’s Fortunes?

While Brexit may be unlikely to impact directly on property values or transactions levels, it could create significant macroeconomic problems that gradually take their toll on the economy. The sustained devaluation of the pound and a disproportionate rate of inflation offer relevant, recent examples, as does the growing desire to increase the base rate of interest. Such factors could combine to trigger a rise or decline in price points, while creating further imbalance that drives sentiment even lower.

Remember, a buoyant and prosperous economy often manifests itself in the form of a thriving property market, so the uncertainty created by Brexit could indirectly imp growth in both the residential and commercial markets. While property buying companies like Flying Homes offer a useful service for those living in areas like inner London, where house prices have dropped 2.1% since January 2016, Brexit could still cause activity levels to reach an all-time low.

These issues could be exacerbated further depending on the outcome of Brexit negotiations and the nature of the deal offered to the UK. An unfavourable deal could send prices into a fearsome, downward spiral, forcing owners to lose money and become encumbered with negative equity (which could in turn trigger another recession). Of course, a positive deal could have the opposite effect, and trigger long-term growth and soaring price points.

The Last Word

As we can see, Brexit could have an indirect impact on UK real estate, although it remains unclear as to how this will manifest itself on price points, demand and the level of activity in the market.

There is also the issue of London, which has already been gripped by falling property prices and controversy surrounding foreign investment. If the capital were to have its reputation as a global financial centre fatally undermined by Brexit, London’s property market could collapse and trigger a domino effect that resonates throughout the rest of the UK.