Despite all the uncertainty regarding the vote on the 23rd June 2016 to leave the European Union, house prices have gone from strength to strength, having surged 3.8% since January 2017. Is this indicative of a strengthening economy? It may be too soon to say, but it's certainly encouraging.
This surge is remarkable especially considering the somewhat gloomy predictions resulting from the Brexit vote. Many economists predicted that a leave vote would result in businesses leaving due to a lack of free movement and increasing red tape. In addition, the inability to recruit seasonal workers from the continent could – some argue - have a detrimental impact on businesses requiring large amounts of labour in a very narrow timeframe, such as on fruit farms.
As result, estate agents YOPA decided to look at house prices to see how the economy had faired since January 2017. This is because house prices are traditionally a barometer of how well the economy is perceived and provides a broad snapshot of the public’s financial position. These measures correlate well with GDP growth, economic sentiment, as well as immigration and emigration figures.
YOPA collated various predictions from industry experts in January 2017 to see what growth would be like at the end of the year. The predictions resulted in an overall 1.2% growth in house prices, which would be considered modest by any measure. So far, the rise of 3.8% has exceeded expectation wildly, and if it continues, house prices would rise by more than 7% by the end of the year.
So is this indicative of the impact of Brexit?
It pays to be cautious, particularly as the United Kingdom is not out of the European Union yet. For all intents and purposes, it still has free trade, freedom of movement and a full customs union, so it's fair to say that very little has changed so far. However, expectations are that the economy is still prospering, and people are broadly positive regarding the future, particularly when it comes to long-term finances.
In addition, there is still some uncertainty as to whether Brexit will be hard, soft or cancelled completely, especially given the perceived lack of progression in the negotiations. However, using house prices as a barometer of the overall economy makes for interesting reading, especially so over the coming months and years.