How a no-deal Brexit could affect the Northern Ireland property market
Making forecasts about either Brexit or the property market with any degree of certainty is a complicated job in itself at the best of times, so speculation and opinion when it comes to how a no-deal Brexit will impact property prices in Northern Ireland and the rest of the UK is understandably fraught with difficulties.
The property market is in constant ebb and flow depending on a large number of factors, such as the supply of new build housing in the area, economic confidence giving rise to more home movers, mortgage product offerings, seasonal patterns around school schedules and holidays, and many more. While Brexit has been on the horizon for a long time, the possibility of a no-deal Brexit has only really entered the wider UK consciousness in light of recent moves by Boris Johnston to commit to leaving the EU on 31st October with or without a deal, and it will be without doubt a factor at play in the fortunes of the property market for a considerable time to come.
When we consider the potential impact of a no-deal Brexit on the property market, it is important to understand where the market is currently at. The property market in Northern Ireland has for some time now been driven by first time buyers, who in particular have an appetite for new build properties. Home movers have not had sufficient confidence in property values and the economy for some time, so we have not seen the long chains of sales and purchases that were typical prior to and during the property boom. That is unlikely to change in the near future under any form of Brexit – deal or no deal. The main issue will therefore be how the supply of new houses is likely to be affected.
If builders and developers were cautious at the prospect of Brexit with a deal, there is no doubting that there will be a great deal of hesitancy to commit to new large scale developments while a no-deal Brexit is a genuine possibility. The economic outlook has been deteriorating and is likely to continue that trajectory in the short term future following Brexit.
Just this week the Construction Employers Federation (CEF) said its members were reporting that the market was facing the most challenging conditions since 2012, and that 28% of firms had already made redundancies, with another 48% saying they might have to do the same in the next 3 months.
The supply of new houses will almost certainly decrease, leading to a fall in sale transactions. Property values are never on their own an indicator of a healthy property market, so adversely, the lack of supply may result in rising house prices as buyers compete against each other on a lower volume of stock.
First time buyer demand is constant. Affordability is however an issue, and recent figures have showed a heavy reliance on the Bank of Mum and Dad for help to get on the property ladder. Those parents making plans for their retirement may not be as quick to loan or gift a large sum of their money, often taken as an early withdrawal from a pension, in light of deepening economic uncertainty following a potential no-deal Brexit. That leaves thousands of purchasers facing the familiar hurdle of finding the deposit for their proposed house purchase.
Housing supply and buyer affordability will as such be the key issues. How Brexit with or without a deal will affect those is still very much speculation. KPMG has gone so far as to predict a house price decrease of 6.2% next year if there is a no-deal Brexit, potentially dropping by as much as 20%. It predicts a 1.3% increase in property values if a deal is reached. It predicts that Northern Ireland will be the hardest hit with average price declines of 7.5%.
Whatever happens on 31st October the Northern Ireland property market will find a gear, just as it has in the face of numerous difficult times over the years.
If you are buying or selling a house in Northern Ireland and require a property conveyancing solicitor to handle the legal process for you contact us at Wilson Nesbitt by clicking here to see how we can help you.