‘House prices to fall here if UK fails to get Brexit deal’
Property prices will fall if Britain leaves the European Union without a trade deal, a new report states.
This country faces Brexit-related risks because of its tight links with Britain, its largest trading partner, according to ratings agency Standard and Poor’s (S&P).
“Should the UK government fail to secure a transition phase and crash out of the EU without a trade deal, Irish trade with the UK would likely suffer, including residential investment in Ireland originating in the UK,” the report said.
“In that case, our forecast for house prices would likely be substantially lower.”
However, it said if a situation where there is no trade deal is avoided then property prices will keep rising.
The report said economic recovery, job creation and housing shortages will keep property prices going up.
“The ongoing recovery, labour market strength, and housing shortages will keep house price inflation elevated,” stated the ‘Europe’s Housing Markets: Soft Landing in Sight’ report.
It predicts that prices will rise largely due to the labour market continuing to perform strongly.
“This should continue to support demand for housing, but also help with further deleveraging of household debt, which stood at 142pc of disposable income in the second quarter of 2017,” according to the report.
Last year saw property prices rise at double-digit rates.
But this was down to “very solid economic growth overall” from the recovery in employment and what the report called a moderate acceleration in wage growth.
House price rises have also been driven by a pronounced and persistent shortage of supply since the crisis.
The has led to a 39pc rise in residential construction volumes year on year, it said.
But the S&P report said construction output is coming from such low levels that it will take another four years’ growth at the current rates to regain pre-crisis levels.
“As a result, completions, albeit growing fast, are still far from satisfying pent-up demand.
“Demand for housing is also being fed by positive net immigration on the back of an improving economy,” it said.
House prices rose by an estimated 11.5pc over the whole of last year.
For this year, the ratings agency predicts rises of 8.5pc, with annualised growth of 6pc in 2019 and the same again the following year.
S&P said the Government introduced several measures to remedy the housing shortage in the Budget, but the cost and planning impediments make it “unclear” how many units will actually be built.
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