Property prices were at the forefront of the EU debate in the run-up to the referendum, with the now former Chancellor George Osborne claiming that the value of homes in the UK could fall by as much as 18% following a Brexit vote.
Based on the average price of a home in the UK, Osborne’s forecast suggested that the average residential property could fall in value by more than £50,000 within two years of the vote in comparison with what it would be if the UK stayed in the EU.
But his assertion, or scare tactic, depending on how you viewed it, was rather bold given that there is a severe housing shortage in this country.
The number of new homes currently being built remains significantly below the government’s target of 200,000 new homes a year, and is almost half the estimated 300,000 new homes a year needed just to meet existing demand for housing in this country, according to a new report from the House of Lords Economic Affairs Committee.
And yet, rather than increasing new housing supply, the latest housebuilding data shows that residential construction levels are actually falling: down by 3.2% in May – the biggest drop since February 2014.
Housing output has now fallen in every month this year apart from February, and the signs are that development levels could fall even further in the coming months.
Last week, the UK’s largest housebuilder Barratt said it could reduce the rate at which it builds new homes as the company prepares for a potential slowdown following Britain’s vote to leave the EU.
Overall, the UK has missed its housebuilding targets by a staggering 1,199,180 since 2004, recent figures from Yorkshire Building Society revealed.
The lack of housing supply has caused prices to rise well beyond wage-growth, which has increased competition for properties and priced many people out of the market, as Andrew McPhillips, chief economist at Yorkshire Building Society, explained: “The Brexit decision and the uncertainty it creates around the prospects for private sector housebuilders, not to mention the country’s economic outlook, is likely to heighten the housing crisis.”
He added: “The longer we leave the supply crisis to worsen, the more difficult it will be to resolve. The UK has failed to build the number of homes needed to meet demand year after year, which has consequently inflated prices and made it even more difficult for those looking to buy.”
With housebuilders failing to deliver anywhere near the number of homes the country needs, property prices will inevitably rise further in the medium to long term, even if there is a dip in the short term.