Is Brexit finally making it easier to buy a house?

House prices are cooling. But is it good news for first-time buyers? 

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Before the Brexit referendum, financial journalists – myself included – painted lurid pictures of how a vote to leave the EU would cause house prices to dive overnight. We imagined a repeat of 2008, when they did plummet (the average house price in April 2009 was £64,603 lower than it is today.) In reality, after the vote, house price growth ticked on. 

But even if the scenario was wrong, predictions about the direction of the housing market now appear to be coming true. The Halifax house price index found that while the average house was worth 2.1 per cent more this July than the same month in 2016, its value had fallen by 0.2 per cent over the past three months. The Nationwide house price index for July, meanwhile, showed prices remaining broadly stable. 

So to cut to the chase: is Brexit the start of a brave new world for first-time buyers? Here’s what you need to know.

Brexit isn’t the sole cause of housing market changes

In 2016, then-chancellor George Osborne oversaw two important tax reforms – the end of generous tax relief for landlords and a shake-up of stamp duty paid on each house purchase. As a result, buy-to-let investing no longer looks quite so attractive, and the wealthiest buyers are being put off by higher stamp duty costs. 

But foreign investors are still buying

Middle-class dinner party conversations now include a mandatory moan about foreign investors buying up all the property. Whether or not this is true (British aristocrats are doing quite nicely as well), it is certainly the case that the slump in sterling post-Brexit has made British cities resemble a January sale for the international elite. 

Whether or not this buying spree ends is likely to depend on foreign investors’ expectations of a Brexit deal. Lee Kum Kee, the Hong Kong company which just bought London’s “Walkie Talkie” building for £1.3bn, seems to be betting on a good one. The government’s public commitment to a transitional deal is also making this more likely. 

A house price crash ≠ more first-time buyers

Renters may sometimes appear to be wishing for the housing market equivalent of the Rapture, but house price apocalypse is not necessarily good for first-time buyers. Back in 2009, when house prices were at their low point, mortgages aimed at first-time buyers also disappeared. Instead, buy-to-let investors got the bargains.

Brexit’s impact on the jobs market matters too

It might seem obvious, but a 2017 report by Lloyds Bank showed hard data that house price growth is closely correlated with employment opportunities. If you have a regular income, you’re more likely to be able and willing to take out a mortgage, even if it’s a big one. 

So far employment has held up since the Brexit vote, but since both the main political parties appear willing to leave the single market, there are likely to be substantial changes in employment in the future. Also, changes to mortgage regulation mean that affordability is now tightly monitored – you can usually only borrow about 4.5 times what you earn, and if you can't get a pay rise, that ain't changing any time soon. 

Mortgage rates are historically low

Mortgage rates are influenced by the Bank of England base rate (although they are also influenced by interest swap rates, which change day to day.)

Just a few years ago, the talk in mortgage broker circles was about when the Bank of England would raise the base interest rate from the recession-era low of 0.5 per cent. Instead, after the Brexit vote, the Bank slashed it further, to 0.25 per cent.

In other words, the Bank is deliberately trying to make it cheaper to take out a mortgage in the Brexit era. 

So who does best in the Brexit housing market? Given the level of uncertainty, the winner is likely to be someone who can invest in foreign currency, but who can also hold on to the property for a long time if there's continued political and economic turmoil. The loser is anyone who has bought in a city where the jobs market is likely to be affected by Brexit (the Centre for Cities predicts Edinburgh, Slough, Swindon, Reading, Worthing and Aberdeen will be among the worst hit), as well as those who may need to sell within the next few years, and who rely on their pay check to cover their mortgage. Which one sounds more like you? I think I can guess.

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.