While the global effects of the “Brexit” — Great Britain’s voter decision to leave the European Union — are yet to be determined, local effects on the housing market may already be underway as buyers and sellers both begin to brace themselves for an uncertain future. “A recession certainly cannot be ruled out at this […]
While the global effects of the “Brexit” — Great Britain’s voter decision to leave the European Union — are yet to be determined, local effects on the housing market may already be underway as buyers and sellers both begin to brace themselves for an uncertain future.
“A recession certainly cannot be ruled out at this point,” read a statement from the Center for Economics and Business Research. In the week-plus since the historic and surprise Brexit vote, consumer confidence has already plunged to low levels not seen since recession-ridden 2013.
The United Overseas Bank also issued a statement that reads more like a harbinger: “As the aftermath of the U.K. referendum is still unfolding and given the uncertainties, we need to ensure our customers are cautious with their London property investments.”
Indeed, the future of London housing in particular seems precarious.
“Some [home buyers] are putting purchases on hold or pulling out entirely, spooked by the lack of clarity over what is to come,” writes Financial Times Money editor James Pickford. “Agents and brokers are reporting buyers asking for a 5 to 10% discount, even after the seller has formally accepted an earlier offer. Their behavior seems entirely reasonable: why would you buy if you thought the price was soon to fall?”
Even with basic home improvements, like a kitchen remodel averaging a 72.8% return on investment, British homeowners are unlikely to see much growth in the value of their homes anytime soon.
On the other hand, the effects of Brexit may be reverberating across the Atlantic in an entirely different way. The Fiscal Times reports that soon after the referendum, U.S. mortgage rates plunged to a three-year low as “investors concerned about the fallout from the vote dumped money into the U.S. bond as a safety investment.”
While it’s bad for the British, it might be good for American home buyers. “Mortgage rates have not been an impediment to the housing market, but for someone who is in the market, the timing couldn’t be better,” said Bankrate chief financial analyst Greg McBride. “The main thing holding the housing market back is the lack of inventory of homes for sale and the lack in growth in household income.”
If Brexit does bring more investors to the U.S. as an alternative, that market may continue to improve for Americans across the board.
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