Unique Property Blog

Brexit - Part 5  House Prices

Okay, the usual twaddle about house prices is out. The chancellor of the exchequer and his mates are getting worried over the Brexit vote so they wheel out all the scary things they think will make people vote to stay in. As usual the comments are pure rubbish. What’s new?

According to Osborne house prices will fall by 10% if we leave the EU and will rise by 10% if we stay.

Sorry guys, I’ve been keeping score on government comments and think tanks’ predictions on house prices. Over the decades I have yet to see a single correct forecast. That’s it guys, there has been a 100% failure rate. The only way they get away with their forecasts is because people have very short memories, and they seem to have an inbuilt belief in any document which has some kind of official stamp on it. Mine, of course, have no stamps on them, but I’ve never yet been wrong.

I have been doing analysis of house prices for nearly forty years. I dont predict what is going to happen so I can’t lose, but I simply point out what is happening at the time, and how that is likely to pan out over the coming year. I’ve yet to be wrong in what I say.

So, what is my take on Brexit and house prices? It’s a non-event. Brexit will make no difference to house prices one way or the other. If they crash for some reason, that will not be because of the referendum result. If they rise, similarly, it will be nothing to do with the referendum. House prices work on a totally different metric.
For starters, we have been told that sterling will plummet on exit. As the polls veer towards an exit vote I note sterling has been rising against the euro. Here’s the chart. If sterling is doing okay, why shouldn’t everything else do okay?

 

I am not going to say house prices will rise if we stay in. The answer is, no-one knows what effect any change will have, but the real driver of house prices has nothing to do with Brexit.

While we’re at it, let’s have a look at some basic economic indicators, which show what a complete disaster the EU has been economically. They clearly indicate we’d be better off out. Here they are.

First, GDP. Back in 1973, when we joined the EU (as it is now) produced 38% of global GDP. When the EU formally began in 1993 it generated just under 25%.. Today this figure stands at 17%. That’s a 55% drop – a pretty significant slump compared to the US which has witnessed a 27% fall in GDP over the same period.

Next up, wealth. Here, using GDP per capita as our measure, the UK has inched up from 29th on the list of wealthiest countries in 1973, up to 18th in 1993, and 13th today. That’s not a bad performance. But, interestingly, nations that border the EU but are not actually members – the likes of Switzerland, Norway and Iceland – have done even better. In 1973, just one of them made the top ten richest countries. Today, all three make the grade.

Dont worry about the price of your house. It may go up, it may go down. On the other hand, it may not.

john

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