Five years on, how has Brexit impacted the UK property market?

three European Union flags outside of the European Parliament in Brussels

It’s been more than five years since the UK decided to leave the EU, confirmed by the referendum held on 23 June 2016.

In the last five years, the Brexit debate has rattled on, as debates over “hard”, “soft”, or “no-deal” Brexit, and constant conversations about the Irish backstop extended the saga ever further.

All these complexities mean you can forgive many of the commentators who made predictions about what would happen to the UK, depending on the outcome of the vote. 

One such prediction that remains worth examining is that of then-chancellor George Osborne, who claimed that house prices could fall by as much as 18% if the UK voted to leave.

This claim seems outrageous, until you remember that, even two years after the vote in 2018, the Bank of England (BoE) governor at the time, Mark Carney, said that UK house prices would fall by 35% over the next three years in the event of a no-deal Brexit.

But just how accurate were these claims? Did Brexit have a long-lasting, net negative impact on the UK property market? Or were the predictions incorrect after all?

House prices reached all-time highs

Looking at house price data, both from just after the vote and up to now, the predictions look frankly wrong.

At the time of the vote in June 2016, the UK house price index recorded the average house price in the UK to be £212,887. In Scotland, the price was £140,234.

But, by July 2016, the average price had actually risen to £215,127 for the whole of the UK, rising to £221,833 by June 2017.

It was a similar story in Scotland, with prices reaching £142,294 in July, before climbing to £143,634 a year later in June 2017.

Now, as of June 2021 when data was last available, the average UK house price had reached an all-time high of £265,688, with Scottish house prices peaking at £173,961.

These figures are partially to be expected; house prices do tend to rise over time, in line with inflation.

But these rises in periods of just one and five years, respectively, are above and beyond what anyone would have – or did – predict.

Of course, Osborne and Carney’s predictions couldn’t have taken the impact of Covid into account. The pandemic-induced recession and subsequent recovery measures, such as the Stamp Duty and Land and Buildings Transaction Tax (LBTT) holiday, no doubt had a big part to play.

But clearly, the housing market has far exceeded post-Brexit expectations.

Supply and demand more important than politics

Seemingly, there have been other, more important factors than the Brexit vote that have driven prices high.

For one thing, an imbalance in supply and demand has forced prospective homebuyers to compete with one another over the limited amount of housing available.

Meanwhile, the BoE base’s rate, the central rate that determines wider market interest rates, hit an all-time low in 2020. As a result, borrowing has been cheap, allowing more buyers to get their hands on affordable mortgages.

This has encouraged individual buyers and buy-to-let landlords to borrow cheaply, no doubt helping to push prices up even further.

Property investments were the most lucrative asset class in 2017

Fascinatingly, rather than falling in value, property was actually the best investment asset in the year after the Brexit vote.

According to data from Royal London, property finished as the highest yielding asset in 2017, continuing to produce a small return in 2018, too.

Even in 2019, when more than half of the most popular asset classes failed to provide any returns at all, property was one of the least affected investments.

This goes to show that rather than falling, property was largely immune to the uncertainty that the vote caused.

Brexit’s impact seems almost absent

It’s clear that Osborne’s prediction was entirely wrong. However, with so many other factors at play, it’s certainly hard to criticise. After all, in other areas, Brexit did cause havoc.

Almost overnight, the pound dropped to its lowest level in 30 years as investors panicked over the uncertainty of the result.

Similarly, the devastating impact the negotiations have had on British fishermen have been well documented. Reuters, the Financial Times, and the Independent have all published articles showing how the industry has suffered at the hands of the vote.

Equally, no one could have predicted the impact that Covid would ultimately have across all industries, least of all giving the property market a boost to record-high levels. This boom was simply impossible to imagine.

Overall, house prices are notoriously fickle and difficult to predict, and trying to time the market based on any expert expectations is a fool’s errand.

There are simply too many factors that can influence values, and too many unknowns that will only come to light when experts look at the data in retrospect.

Work with us

If you’re looking to make a splash in the housing market, you should consider working with us at Edinburgh Mortgage Advice.

As experienced mortgage brokers, we can offer personalised advice that’s specific to you. We can help you find the right mortgage deal for you, no matter what house prices are up to.

Email [email protected] or call 0131 339 2281 to find out more about how we could help you.

Please note:

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

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