What could the latest Brexit developments mean for the property market?
Joe Arnold is managing director at Arnold & Baldwin
There is still no certainty to the future following another critical week for Brexit, but perhaps the extension offered by the 27 EU leaders does at least provide some clarity as to which way the wind is blowing.
By agreeing to a delay until 22 May if MPs approve the Prime Minister’s withdrawal deal and a shorter delay until 12 April if they reject it, by which time the UK must request a longer extension or leave without a deal, the EU leaders have at least shown that they are among those who fear the UK leaving the bloc without a deal would lead to chaos. They may have entered the summit with strong words, but they left presenting a logical and constructive set of options.
So, what are those options and how could they impact the property market?
1. The Prime Minister’s deal is agreed
Given that this has been put forward twice, rejected twice and is unlikely to change, there is little probability of this happening. If it does, there will remain an element of uncertainty about the impact on jobs – a risk that both the CBI and TUC have highlighted.
So, while the prospect of crashing out without a deal will be removed, it is still likely that people will tread carefully when it comes to buying and selling property and so, in many ways, we could probably expect the market to continue in a very similar pattern to its existing course.
2. Leave without a deal
It looks like the risk of this is reducing as the EU leaders have indicated their preference for an orderly exit but, in my opinion, it could also have the most dramatic impact on the property market.
If there are significant job losses, house prices will most likely start to fall and, if this is combined with increased interest rates as part of a package of emergency fiscal measures, there is a real chance we could see prices spiralling downwards. At this stage, rising rates do not seem like a realistic possibility, but in this environment, it is unwise to rule out any possibility.
3. Agree a longer extension
A longer extension will naturally extend the uncertainty and, if this is the course that is taken in April, we can again expect the market to continue in the same mood as it has currently, with subdued transactions but relatively stable prices. There is no reason to anticipate this to change until there is real direction for the future.
4. Article 50 is revoked
Whether it is the result of a second referendum or other means, there is still a possibility that Article 50 might be revoked. From my perspective, this would have the most positive impact on the property market. We have experienced subdued transaction levels since the referendum result in 2016 and there is significant reason to believe there is pent up demand from homebuyers and sellers.
If Article 50 is revoked and the country returns to more certainty it is likely the brakes will come off and transaction levels will increase. Whether or not these result in higher prices will depend on the balance of supply and demand. Either way, more activity will be positive for brokers, lenders and the economy as a whole.