No-deal Brexit could cause 6% reduction in UK house prices

UK house prices could drop by 6.2% next year if the UK leaves the EU without a deal on 31 October, according to accountants KPMG.

However, if a deal is reached, KPMG predicts that house prices will rise by 1.3%.

London will probably see a fall in prices with or without an exit deal this year and next, it said, with sharper declines if no deal is reached.

However, the low supply of new housing stock could prop up prices over time.

“Overall, while a no-deal Brexit could dent property values in the short term, it may make less impact on one of the fundamental factors driving the market: the stock of regional housing,” said the report.

“Housebuilders are expected to reduce the supply of new housing in some regions in the short term as a response to a deteriorating economic outlook.

“So, while there will be fallout from the initial economic shock following a no-deal Brexit, the market is expected to recover most ground in the long run,” it said, assuming the economy recovers.

Given that the housing market is hard to predict, KPMG said prices could see steeper falls – of perhaps 10-20% – in a no-deal scenario.

“Transactions volumes will likely fall much more than prices – making government housing delivery targets impossible to achieve and slowing new building across the sector,” said Jan Crosby, UK head of housing at KPMG.

Assuming no agreement is reached, KPMG says Northern Ireland will be the hardest hit next year, with average price declines of 7.5%, followed by London at 7%. The least-hit will be Wales and the East Midlands, with 5.4% declines apiece.

This year, most regions will see changes of less than 2%, KPMG says, with the exception of London, down 4.8%, and Northern Ireland, down 2.2%.

If a deal is struck, prices in London and Northern Ireland are still predicted to fall this year, by 4.7% and 1.2%, while most other regions will be largely unchanged. Scotland and the North West will see gains of 1.4% and 1.6%.

And next year, all regions will gain aside from London’s predicted 0.2% slide. The average increase will be 1.3%.

KPMG noted that the UK housing market is healthier than it was at the time of the last housing crash – when prices fell by 15% in 2008. House prices are lower as a percentage of earnings in most regions outside London and the South East.

In addition, compared with the aftermath of the 1991 recession – when housing prices dropped 20% over about four years – mortgages are much cheaper. Back then, the Bank of England’s base rate was about 14%.

Food prices to rise by £220 in 2020 over no-deal Brexit

Researchers at the University of Sussex have suggested the cost of a family food shop will rise by £220 a year if the UK leaves the EU without a deal.

Researchers said that food will increase by 7% next year in the event of a no-deal Brexit.

Trussell Trust the food bank charity said there needs to be a “dedicated hardship fund” to help those who will be affected by the rise in food prices.

Labour leader Jeremy Corbyn accused Boris Johnson of “gambling with people’s lives” by threatening a no-deal Brexit.

Corbyn added, “After nine years of austerity holding down people’s pay, with food bank use at an all-time high and with millions of people living in poverty in one of the richest countries in the world, a hike in food prices will be unaffordable for many families.

“Instead of handing out tax cuts to the richest and staking all our futures on a trade deal with Donald Trump that risks the takeover of our NHS by US corporations, the prime minister should rule out no-deal and concentrate on improving the lives of people struggling to get by.”

Garry Lemon, the Trussell Trust’s director of policy said, “Any form of Brexit risks increasing the cost of food and essentials, and therefore increasing need for food banks.

“We’re giving Brexit guidance to food banks, but there’s a limit to how much we can prepare for and mitigate its consequences.

“The responsibility to prevent more people being pulled into poverty lies with our government.

“We cannot rely on support driven by volunteers and food donations to pick up the pieces, particularly in the event of no-deal.

“To anchor people from poverty as Brexit unfolds, our government must ensure additional protections such as a dedicated hardship fund are in place throughout, alongside an end the five-week wait for Universal Credit payment.”