Will the two huge political changes affect Britain’s housing market?

January 4, 2017 by Brendan

House Prices

The Brexit decision and the election of Donald Trump as U.S. President were momentous and largely unexpected political changes, but what effect might they have on the property market?

Although the property market is a small portion of the British economy, any political changes that affect the economy as a whole can affect the property market.

One of Trump’s many campaign slogans was ‘America first’. Although many of his supporters interpreted this as a call to tear up all trade agreements that America has signed, this is unlikely to happen. Trump’s rhetoric in the presidential campaign appears to have softened since he won the vote, as witnessed by his acceptance speech in which he suggested that some, but not all, trade agreements may be scrapped.

Trump has said that he is not a fan of the North American Free Trade Agreement and this may be either modified or ditched completely. The billionaire businessman is a fan of Great Britain, and is expected that he will want Britain to continue to trade with the United States, and some trade agreement could be created.

British financial experts say that it is too soon to know how Trump’s presidency will affect the British economy, but they are cautiously optimistic that it will not suffer a negative effect and that the property market will remain buoyant.

One effect of the Trump win is that it could lead to opponents of Trump’s policies leaving America, and some may head to Britain. The pound has weakened against the dollar and the euro post-Referendum, with has made property cheaper to buy for Americans. Though London property has risen by over 10% in a year, it has actually dropped by 10% for Americans because of the fall in value of the pound.

Immediately following the Brexit vote, there was uncertainty in the economy and pundits expected low house price increases. This has not been the case, with British house prices rising on average 7.7% over the year.

House prices in London have risen by 10.9%, with some areas of the capital rising by around 20%. This has caused many first-time buyers in London to look outside of the city to find cheaper housing.

Many financial analysts predict that Britain leaving the European Union could mean that the increases in house prices will slow down next year, rising about only 0.5%, but this is speculation rather than certainty.

The number of house sales has fallen compared to the beginning of the year, and this could be caused by the uncertainty after Brexit. Some property experts have called on the government to reduce stamp duty to stimulate the housing market.

In his Autumn statement, Chancellor Philip Hammond announced his stimulation of the property market by allocating of over £1bn in funds to encourage the building of new houses, including affordable ones suitable for first-time buyers.

The two major political events of Brexit and the election of President Trump have certainly created financial uncertainty and this may have an effect on the housing market, but though we can speculate, the best step is to closely monitor what unfolds over what is sure to be an interesting next few years.