AS a nation we have always enjoyed what has become known as a “special relationship” with America. Witness such phrases as “our cousins across the pond’. Although we have plenty in common in all aspects of life with the US, of course, in lots of ways we are hugely different.
When it comes to the property markets there are plenty of similarities between the two nations and how we go about our business when it comes to housing. At present the average house price is the UK is double its American counterpart. And London is the second most expensive city in the world to buy property, beaten only by millionaires’ playground Monaco.
But while an Englishman’s home is his castle, those castles are not necessarily that big.
The average house size in Britain is just 86 square metres (925 square feet), around 40 per cent smaller than the average American home.
In both nations, booms and crashes have come and gone over the years, as have periods of a more settled market, with only minor fluctuations to consider based on the broader considerations of economic stability.
On June 23 of this year, however, any thoughts of an extended period of equanimity were exposed to a potentially seismic shift: the UK Voted to leave the EU in a referendum. Brexit won the day and, overnight, gave birth to a new political and economical epoch. And as well as huge implications for the UK property market, the US of A, too, are subject to possibilities of flux in this concern. Indeed, Brexit sent shockwaves through the global economy as a whole.
House prices are likely to fall in the UK amid ongoing uncertainty after the vote. The Treasury has predicted that house prices could drop by up to 18% over the next two years and we could thus see an increase in the cost of mortgages. But, also, it could mean higher home prices in the United States. Yes, most Americans see the most important consequence of the decision will be Brexit’s affect on real estate prices.
It may seem strange that a political decision in this country could have any impact on American housing prices, but such is the nature of the “global economy”. One of the most immediate effects was to send yields on US government debt falling, in turn putting downward pressure on mortgage rates. It has had a minimal impact to date but must be watched carefully.
Another result of the vote is that the Brexit fallout is testing the faith of property investors in the UK which could lead to greater interest in US commercial property.
We await the situation to unfold over the coming months. It’s most certainly one to watch.