The Push For Home Ownership
|"The weaker pound now means that property in the UK is cheaper in overseas currency "|
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In just over 3 months, Britain will vote on its continued membership in the European Union. David Cameron’s announcement that the referendum will take place on June 23rd has already had implications for the economy due to the uncertainty of the outcome. So far this has primarily affected the currency market, weakening the pound’s exchange rate, but economic uncertainty affects sentiment in the housing market in other broader ways.
The weaker pound now means that property in the UK is cheaper in overseas currency. Buying a home here is around five per cent cheaper than it was at the start of the year assuming away any changes in price. But that also means that any existing property owned in the UK has fallen in value when converted back into local currency.
But the majority of transactions are domestic purchases so the real impact of a vote to leave on the property market will depend on the overall impact on the wider economy. The short run to the referendum means any impact from uncertainty has less time to affect the market. Like with national elections, this will most likely be reflected as a pause in activity as some potential buyers, particularly investors, wait for the results before making any substantial purchases. A vote to remain would likely result in the market returning back to the status quo and any delayed purchases moving forward after the vote.
Were the UK to vote to leave, well the elephant in the room is that no one is clear what an exit actually looks like. The likelihood is that even with a leave vote, the UK will remain a strong economy in the long-run but the transitory period could prove to be painful depending on just how smooth the exit negotiations are.
A long slow renegotiation of our relationship with the EU could prolong the uncertainty in the economy. Uncertainty can lead to slower growth in the economy which will have an adverse impact on job creation & wage growth. This in turn will have an impact on the housing market as it slows down the level of activity in the market.
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