Will There Be A Brexit Recession?
Last updated 16th September 2019 • Lois Arcari • JaeVee
Property and the UK economy
With all the buzz about Brexit, US ‘trade wars’ and the state of the global economy, some economists have been spooked into forecasting a UK recession.
But are these predictions true, or blown out of proportion?
We’ll give you a fact based look into the economy as it stands and how it’s affecting UK property.
UK recession likelihood
There have been warnings of a UK recession ever since the Brexit vote came in.
It can be hard to find your feet amongst all these conflicting reports, and sometimes daily ups and downs.
The Government’s position is that any economic contractions where they happen are short term blips in the market, and the market will prove more resilient once it knows the terms on which we’ll be leaving the EU.
Indeed, some experts are relieved about the clarity and increased preparation of the new Tory Government for a no deal Brexit.
Optimistic economists are pointing towards the huge growth of both employment and wages in the UK.
International investors also seem less fazed by Brexit, with investors mainly coming from mainland China and Hong Kong.
Almost ⅔ of UK businesses in mainland China think Brexit will have no effect on the economy - and 47% of them believe that any effects will actually be positive.
Hong Kong has been one of the big international players in property investment in the UK, and investment only looks set to grow as Hong Kong investors have bought into big UK companies, and are applying for Visas into the UK at an unheard of pace.’
Looking at the data, most of the stark predictions of a recession came following 0.2% contractions in the UK economy between April and June.
New data, however, shows that the economy actually grew by 0.3% this July, with all sectors - even struggling construction and manufacturing - experiencing modest growth.
This economic rebound is attributed to a slight growth in the UK’s dominant services sector and the Tory government’s confident new public spending policies.
Looking more recently, the pound has had a string of successes on the back of Boris Johnson’s personal defeats.
First of all, it rose with Parliament's law to block no deal Brexit, then as the conservative government lost its majority, and then confidence increased as Johnson softened his stance on No Deal Brexit - making the last couple of weeks an overall positive for the pound, even with some downturn as parliament goes into its prorogue and long term speaker of the commons John Bercow stepping down.
House prices doing well
While many industry experts predicted that house prices could only shrink in the wake of Brexit, there has actually been impressive house price growth in some parts of the country.
In a recent study, Zoopla revealed that 92% of homeowners in Yorkshire and the Humber are expecting to see their house prices grow by an average of 4.5% over the next 6 months, with 90.5% of homeowners in the North West of England and 90.3% of Scottish homeowners close behind.
And there’s set to be good long term growth as well.
Research from Savills predicted that house prices in the UK are expected to grow by 21.6% over the next 5 years.
The top estate agent also noticed that July had the highest amount of property investment transactions in 2019 so far, with over £480 million spent by Asian investors alone that month.
Indeed, despite all the Brexit fears, RICS - The Royal Institute of Chartered Surveyors - has predicted that property transactions will go up by 1.5% over the next 3 months.
They’re also confident of a ‘Brexit Bounce’ with impatient sellers, who are unwilling to wait any longer before moving, generating a greater flow into the property market.
The Halifax House Price Index even found that house prices have grown at their highest rate in 2 years.
Overall, while it is likely that some areas will see lower prices in the short term, the market is likely to stabilise quite rapidly and grow even further into the future - meaning that the property investments you make now are very likely to generate good capital once they’re completed.
To get more unbiased reports on what Brexit means for property, read our blog.
Please note, this blog post is not to be considered as investment advice. We recommend you seek independent financial advice and conduct your own due diligence before making any investment.