Vishal Pandya is operations manager at the Society of Mortgage Professionals
Former US secretary of defence, Donald Rumsfeld, is famously quoted for using the phrase: “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.”
He made that statement at a news briefing on Iraq’s ‘weapons of mass destruction’ in 2002 – but 15 years on I am I struck by the perfect way it describes Britain’s impending departure from the European Union , and its possible effect on the mortgage sector.
Let me explain:
A known known – there is a huge skills shortage in the United Kingdom and the prospect of not having easy access to skilled EU migrants post-Brexit could mean that this gap is set to widen.
The known unknown – how negotiations for Brexit will take shape and what Britain will look like outside the EU.
The unknown unknown – as we continue to assess the real impact that Brexit will have on the mortgage market, speculation runs wild.
As we know the buy-to-let market is undergoing a massive transformation. The most recent change, whereby the Prudential Regulation Authority has reviewed underwriting standards, has sparked debate about how the market will start to vary regionally.
A borrower with the same deposit may be able to borrow more up north, for instance, where yields are higher than other parts of the country such as the south east.
Of course these variances in the BTL world are not a direct result of the EU referendum. However, I wonder how any legislation and subsequent regulation put in place as a direct result of Brexit will impact on the supply and demand of housing, and whether changes of the type we now see developing in BTLs could be experienced in other parts of the market. These are the unknowns of Brexit.
Brexit must be on any adviser agenda in discussions with their clients, including the concept of unknown unknowns. Those clients will most certainly appreciate the broad scope of such informed guidance and advice. That certainly is a known known.
One of the biggest areas of speculation centres on Brexit’s effect on the construction industry, where as many as 12% of the workforce comes from other EU states.
Will the future ability to recruit from abroad be restricted by new, post-Brexit immigration policies?
The Federation of Master Builders, claim that the construction industry acts as a weather vane for the property market – but is there a danger that leaving the EU will lead to a shortage of skilled labour at a time when the house building industry most needs it?
I am told that two thirds of smaller builders are struggling to find bricklayers and more than half are finding it hard to source enough carpenters and joiners. If this were to be exacerbated by Brexit, the government’s house building strategy could be in tatters…
It would be extremely reassuring therefore, if a positive official statement with regard to the status of current EU migrant workers and the prospects future ones were to be made sometime soon. Doing so would serve as a further welcome boost for house builders and give them the confidence to plan ahead with some surety?
House building figures have consistently been falling short of the government’s 250,000 a year target, and that deficit cannot be allowed to worsen. If it does, the growing lack of stock would result in even higher prices – pushing them even further out of reach for many first-time buyers.
I am not in any way suggesting I can predict what the outcome of our eventual Brexit will be. That remains an unknown unknown and the long-term effects will probably remain so for years after we eventually leave.
But I do know that right now, we need every signal on green for housebuilding and clear run towards that quarter of a million new homes a year target.