A no-deal Brexit could cause house prices to fall as much as 35% over three years, says the Bank of England. With Brexit just a few months away, what would be the consequences of a dramatic downturn in prices?
- Those with large mortgages could find themselves with negative equity. This is where the value of your house falls below the amount of the mortgage. If you tried to move home, you would need to find the shortfall in order to sell your property and then find a large deposit to buy the next. This can prevent someone moving home as trying to find large sums of money in an uncertain market is very difficult.
- If a significant proportion of people cannot move, the housing market gets stuck, with people being “trapped” in homes they want to move from. This has happened in previous recessions.
- Instead of moving home to be close to their place of employment, Bristol residents will have to commute larger distances, leading to higher pollution emissions and adding stress to family life.
- Fewer people moving home means less tax receipts for the government in SDLT, VAT, etc. There is a huge knock-on effect throughout the economy. When people move home they also buy new curtains, carpets, furniture, white goods etc. High street retailers are already suffering.
- This would come on top of the existing slow-down in the property market that has caused a 20% drop in SDLT receipts for residential property in 2018 compared to 2017. A large part of this is blamed on the very large SDLT increases that were imposed a few years ago.
- On the plus side, first time buyers should find it cheaper to buy their first property and people will extend their houses rather than move, thus helping the building trade.
Margrielle Blake is an Associate in the Residential Conveyancing team at award-winning law firm VWV. Margrielle can be contacted on 0117 314 5380 or at firstname.lastname@example.org.