High ranking officials have voiced out concerns at the G7 meeting currently taking place in Japan, that property prices in Great Britain may decrease in value should UK citizens decide to exit the European Union. Predictions are for a drop of between ten and eighteen percent of all property value if Great Britain exits the EU. It is expected for the housing market to feel much of the negative economic effect of a potential Brexit. Consumer confidence, financial market strength and housing market are expected to bear the brunt if the exit scenario becomes reality. This may also have consequences on related industries like rental and property management, man and van property removal services etc.
Independent regulatory bodies like International Monetary Fund have also warned of increased mortgage interest rates should the Brexit really take place. The financial market uncertainties caused by the Brexit will mean fewer people will be able to afford increasingly expensive mortgages, effectively being shut out of the market. Financial ministers of countries taking part in the G7 meeting in Japan have confirmed fears that businesses and families alike will feel the pinch of a potential exit of UK from the EU. Even if UK citizens decide to renegotiate their relationship with the EU (given the referendum results is a decision to leave) this would turn out to be a long, costly and messy divorce rather than anything else. In the upcoming days UK Treasury is expected to come out with a full analysis and report on what the immediate (projected) impacts of the Brexit may be. The initial shock of a potential Brexit will first befall financial markets due to high uncertainty and very unclear projections for the future. In the medium to long run, this is expected to leave British people poorer and with fewer opportunities.
One such scenario would also be particularly bad for the housing market. People who own their homes would see a drop in property value of up to eighteen percent, whilst those looking to secure a mortgage for a first time home buy would be faced with high, even unbearable mortgage costs. Mortgages will become harder to get – a definite lose-lose situation. What people need is more affordable homes, which is achieved by building more homes, not raising mortgage and interest rates – inevitable effect of a potential Brexit. G7 officials believe this would weaken the British economy as a whole.
Of course critics of these theories point out that homes have increased in value by up to twelve percent across Great Britain in the last twelve months, so a potential drop in value (due to Brexit) would simply bring prices back to where they would have been (cash value). The Independent Office of Budget Responsibility predicts an overall increase of property value by a total of fifteen percent in the next twelve months, regardless of UK exiting EU.
There are many scenarios and predictions out in the open right now, but only time will tell whether or not a Brexit will have the expected detrimental effect.