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As the referendum gathers pace, the headlines in the UK press in recent weeks have been nothing but doom and gloom in terms of the effect of Brexit on UK house prices.
Chancellor of the Exchequer George Osborne has claimed that leaving the European Union would hit house prices significantly and make mortgages much more expensive. He believes that the short-term effect of Brexit will be that property prices will fall if we decide to leave the European Union on June 23rd. He recently stated: “You will see the analysis we will do, but I’m pretty clear that there will be a significant hit to the value of people’s homes and to the costs of mortgages. That is one example of the kind of impact, economic impact, that we get from leaving the EU.”
The same claim has been made by Jayne-Anne Gadhaia, Chief Executive of Virgin Money and a recent survey by KPMG has shown that 66 per cent of estate agents believed that ‘Britain leaving the EU would have a negative impact on inbound cross-border investment’.
In December, Berkeley Homes complained that Brexit would mean London having less influence, fewer jobs and lower growth, and therefore needing fewer new homes built.
However, not everyone sees a fall in house prices as a negative outcome. For every person who has made a fortune from London’s fast-rising house prices, there are 20 or more young buyers eager to get onto the property ladder but who have been priced out.
But before the ‘in’ campaign starts to frighten homeowners with prophecies of negative equity, and the ‘out’ campaign tries to lure the priced-out with the prospect of a new era of cheap housing, we should ask whether the fears of estate agents and developers are built on false premises.
According to a study by Knight Frank carried out in 2013, nearly half of all prime London buyers were non-British citizens, with nearly a third not even residing in the UK. They were simply buying London property for investment or occasional use. However, with 9 per cent of prime market buyers from Russia and 7.5 per cent from the Middle East, Brexit may not make a difference to them. After all, regardless of whether we are in our out of Europe we still have economic stability and favourable rules for non-UK citizens and many other attractions. Following Brexit there would be pressure to introduce laws to limit the purchase of London property by those who aren’t UK citizens, and George Osborne has already tried to appease that urge by changing stamp duty in favour of owner-occupiers.
In the event of Brexit, some of these owners would sell up and EU Institutions would relocate, removing key staff out of London and some banks could even relocate to Europe. In addition, some EU workers could lose their right to live and work here.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
To find out how Brexit could affect your property, talk to Derngate Wealth today.