Boris Johnson failed to deliver on his promise for the UK to leave the EU by the 31st October deadline, but undoubtedly his mood was lifted by the sharp rise in property transactions in Q3 which helped swell the Treasury coffers with £3.1 billion in Stamp Duty Land Tax contributions.
The spike in transactions perhaps demonstrates people finally lost patience with all the uncertainty and decided they had put off property decisions for long enough, whether private individuals moving home or property professionals adding to their portfolios.
This change in attitude saw 305,100 transactions completed between June and September, a significant jump from the already impressive total of 268,400 transactions for the second quarter.
The extension until the new year for a final decision on Brexit, will no doubt be affected by December’s general election, which could see it stopped altogether or Johnson’s deal ratified, once the votes are in and the new Government is formed.
These events are expected to slow transactions in Q4, but if the recent spike was really caused by a loss of buyers’ patience, then we might see another strong set of figures by the end of the year.
Deal or no deal
There are few commentators who believe ‘No Deal’ is now a realistic prospect. Depending which way the public vote swings, the outcomes appear to be between the Johnson’s October deal, which was generally accepted by the EU or a revocation of article 50 and an end to our withdrawal.
Despite this some economists have calculated the likely impact on UK property prices of a ‘No Deal’ Brexit, with most suggesting this worst case scenario would cause a 10-20% drop on average and areas of the country affected differently.
There has been scaremongering and considerations beyond these figures, but there is little in the way of consensus for the more outlandish claims of a halving of property values across the country.
A significant slump would create a multitude of issues for property owners, with years of negative equity contributing to another financial crisis like 2007/8. There will be little appetite for a rerun of that particular set of circumstance so a Government intervention would be expected.
Mark Carney, the governor of the Bank of England has stated that interest rates could go up or down after Brexit depending on the circumstances, but that a ‘No Deal’ Brexit would likely lead the Bank to cut rates.
Any drop in property prices, or a cut to interest rates will typically throw up opportunities for the professional developers that make up the majority of clients here at Signature Private Finance. This sector has faced similar challenges before, like 2007/8 and will carry on as normal with its renowned durability.
There is unlikely to be any loosening of the current lending restriction on the high street however, as the banks continue to cope with Basel 3, which raised the minimum amount of capital banks must hold, introduced new leverage and liquidity ratios, whilst limiting the use of internal models.
Most of the predictions of what will happen in a post-Brexit UK are based on the experiences of expert economists, but until such time as we leave or otherwise, their guess is really only as good as yours.
And of course, the Shadow Chancellor John McDonnell has promised a new Labour Government will change the future of the property market and in my next blog, I’ll give some thought to that scenario.