Now that we have a firm date in place for an EU referendum, talk has naturally turned to what the consequences for the UK property market might be should a British exit - or Brexit as it has been dubbed - from the European Union come to pass. Some online commentators are nailing their colours to the mast with talk of price drops that could be as large as five per cent, around £11,000 to the average UK homeowner.
While these sorts of predictions make great headlines, there is only one thing that is certain – and that’s uncertainty! Unfortunately, such unpredictability is rarely a positive force in any investment market, so the sooner the referendum date of June 23rd has been and gone, the better.
Speculation can play havoc at the best of times, but with an issue as emotive as this, things may get a little dicey as the day of reckoning draws closer. The media are sure to have a field day in the run up to the 23rd, and the tales of woe are sure to flow right up until the final vote has been cast. However, the truth is that no one knows which way the country will go. This is far from a cut-and-dried situation.
The effect of a Brexit
Assuming that everything will remain the same should we decide to stay in the EU, the only real story will come from a departure. Much of the concern seems to be centred around the short- to medium-term impact that a Brexit would have on the markets, with one German report predicting a drop of 14 per cent for the UK’s GDP should we decide to pull out. However, British growth is expected to be far higher than many of our European counterparts over the next few years, so the forecast of such a large drop may be balanced out somewhat when considering market values as a whole.
For those taking a longer-term view of the implications to the UK coming out of the European Union, things seem to be a little brighter. Many are taking the view that Britain will remain a global player regardless of whether they are in the EU or not, and that any downward shift would be recouped once the dust has settled. The problem is that prospective bounce backs are subject to the same elements as the original downturn would be, so we’re back to the realms of speculation once more.
Breaking up is hard to do
What we do know is that since Britain first signed up for membership in 1973, average house prices have increased by an astonishing 2,000 per cent, and breaking this forty-plus year alliance will surely cause jitters in the property market and beyond. Will these jitters lead to substantial price drops in the property market? Only time will tell, but it’s certainly a story that we will be keeping a very close eye on over the coming months.
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