The Effect Of Brexit On The Housing Market in Glasgow
The implication of the Referendum result for businesses operating in housing is the key unknown. The economic impact of ‘Brexit’ and consequences for interest rates, investment and incomes has direct implications for housing. The consensus appears to be a short economic shock accompanied by a period of uncertainty for consumers and business.
An analysis of city level house price growth and transactions over the last 20 years shows that external shocks tend to have a greater impact on market volumes than house prices, especially where there is no accompanying economic downturn.
A Vote to Leave – Greatest Impact on London
The implications of this analysis is that a vote to leave on 23 June would most likely result in a 5% to 10% fall in housing turnover with London bearing the brunt of the slowdown. The rate of national house price growth would undoubtedly slow, but the scale of this will depend upon the economic impact and whether mortgage rates increase. The greater the direct impact on the economy then the greater the downside for turnover and house prices. If the economy keeps growing, albeit more slowly, negative price growth is unlikely. The London market faces greater headwinds irrespective of the Referendum vote. Turnover fell 7% last year on the back of affordability constraints and weaker overseas demand. Tax changes for investors will reduce demand and we expect price growth to slow in the near future even if the £ were to weaken and improve the relative value of central London property.
A Vote to Remain – Growth Boost in Regional Cities
A vote to remain will have the greatest upside for house prices and transactions in regional cities where the recovery has been more short-lived and affordability less stretched than in southern cities. The boost to confidence from a vote to remain, coupled with low mortgage rates would most likely deliver the greatest benefit regional cities such as Glasgow, Manchester, Leeds and Birmingham where housing demand is growing and strong real rates of house price growth are likely to be sustained.