Brexit could drag down house prices – Moody’s
04-14-2016
In its latest reflections on the potential hit to the UK if it votes to leave the European Union, ratings agency Moody’s turns an eye to buy-to-let landlords and purveyors of used cars.
Moody’s says foreign nationals (though not necessarily EU nationals) account for almost half of house sales for homes over £1m in London.
It writes:
A drop in the foreign population would have a cascading effect by lowering housing demand, which in turn would drive down the cost of rent and increase vacant periods.
The pain could be particularly acute for buy-to-let landlords, it reckons, as London accounts for 24 per cent of the UK’s buy-to-let lending and 27 per cent of rental housing.
In addition, “record-low interest rates and rising debt have made unsecured UK consumer borrowing particularly vulnerable in the event of higher unemployment or slower wage growth,” warns analyst Lisa Macedo.
It’s not all bad news for house prices, though, to the chagrin of anyone waiting for a foot on the ladder. The damaging impact of Brexit on economic growth would result in interest rates staying lower for longer, which would mitigate the impact on mortgage borrowers, Moody’s says.
House prices could also be supported by the slowdown Brexit would inflict on the housebuilding industry. Moody’s says:
Uncertainty of the economic landscape after Brexit, has already started to affect sentiment in the residential building sector, which will affect the level of investment in new builds. This could be dampened further post Brexit, further reducing the supply of housing, which could help moderate downward pressure in house prices.
Overall, in the case of a vote for Brexit, we would expect house price inflation to be on the lower end of our forecasted UK house price growth range of 0-5% for 2016.
One potentially off-beat group of beneficiaries: the used-car industry. The rating agency adds:
Used car prices could rise if post-Brexit trade agreements are less favourable for auto imports from the EU than at present, as the UK is a net auto importer and the cost of new cars could rise.