How Could Brexit Affect the Northern Irish Property Market?

December’s election victory for the Conservative party is considered by many to have been a positive step towards the completion of the Brexit process – an exercise that has been in the works since 2016.

While no firm agreement has yet been struck between the UK and EU regarding our departure from the bloc, the latest “deal” – proposed by PM Boris Johnson – has been approved in principle by MPs, meaning we’re edging closer to making final arrangements.

So what impact will this have on the Northern Irish property market – for the time being, for the immediate future and for the long run?

In this article, the specialists at Property Solvers – experts in selling homes quickly – will explore the impact of Brexit on house prices and their growth in Northern Ireland and seek to provide some answers.

The Market as it Stands

Prior to the recent election, industries across the UK had been struggling or stagnating as a result of the ongoing uncertainty surrounding Brexit. 

However, following the Tory victory, the pound has experienced something of a surge – and many business owners appear to have regained enough confidence to continue trading as usual.

Of course, the new deadline of 31st January 2020 is fast approaching – and there is still the faint risk of a no-deal Brexit, despite planning for this eventuality gradually being stood down.

Surprisingly, throughout the period of uncertainty that negatively impacted the UK’s industries up until the end of 2019, progress continued to be made in the Northern Irish property market. This progress continues now, despite any ongoing concerns about the eventual outcome of Brexit.

According to figures published by the Belfast Telegraph at the beginning of October 2019, average house prices in the region had grown by around 3.4% since the previous year. Furthermore, the BBC reported in November 2019 that prices had risen by an annual rate of 4% in the third quarter of the current financial year.

Across the rest of the UK, property prices saw a gradual fall of around 0.2% from August to October 2019, and, as of November that same year, growth had failed to surpass 1% for the previous ten months. Luckily, the territory saw an unexpected rise of 1.7% in December, bringing the annual increase to 4%.

But while the Northern Irish market remained resilient throughout a period where UK property sales, in general, had slowed considerably, will its performance change after we leave the EU with or without a deal?

With a Deal

The Telegraph reports that the boom that seems to have occurred following the election will likely be relatively short-term. Our politicians will still be wading through significant Brexit talks too – and it’s difficult to know exactly what their outcome will be. This may result in a further period of uncertainty.

Despite this, in an article published in October 2019 by Ideal Home, Russell Galley – the Managing Director for Halifax – predicted that the growth in house prices across the UK would be restored to between 2% and 4%.

However, this prediction was made on the proviso that UK would secure a deal before the end of 2019. It will be interesting to see whether a similar effect will be achieved should this occur by the January deadline.

In the same piece, Yael Selfin – Chief Economist at KPMG UK – estimated that, with a deal, we should see house prices stabilising throughout the final months of this year then gradually climbing by around 1.3% during 2020.

While these figures are not particularly strong by current global standards, this is still a relatively positive outcome. However, it’s also important to consider the impact of a potential “no-deal” Brexit, despite preparations for this eventuality being stepped down.

Without a Deal

The UK “crashing out” of the EU without a deal may lead to some surprising results within the Northern Irish property market.

While Yale Selfin predicts that a “no-deal” exit may see the average price of UK housing fall by 6.2% on average in 2020 – with a potential worst-case scenario drop of between 10% and 20% – Northern Ireland may find itself in a unique position.

The fall of the pound against the Euro in recent months has allowed property prices – particularly in border towns – to flourish and, as a no-deal Brexit is likely to result in a further decrease in the value of sterling, this uptick may continue once we leave.

With mortgage rates currently low – and with the possibility of them dropping further still after a no-deal Brexit – housing is likely to remain affordable across the UK. 

In General

In September 2019, chancellor Sajid Javid announced plans to increase the living wage to £10.50 (currently €11.68) by 2024 and to reduce the age limit for receipt of this wage from 25 to 21 within the next 5 years.

While this decision may not be immediately impactful, the combination of wage increases and affordable property may prove positive for the market long-term.

Furthermore, with regards to Northern Ireland, Johnson’s current Brexit deal states that there will be no border in the Irish Sea – meaning that cross-border transactions should not be affected and business of this kind should be able to continue as usual.

As we are already aware, the exact outcome of Brexit will only begin to make itself felt once we enter a transitional period. At this stage, we will have a clear idea of the nature of our deal and will begin to see real-world results.

However, in the interim, it is worth noting that the Northern Irish market continues to enjoy reasonable growth and, due to the factors explained above, is likely to continue to do so whatever the circumstances in which the UK leaves the European Union.