Aug15 What Will A No-Deal Brexit Mean for Conveyancers? Posted By : admin/ 0 comments / Under : News Way back in 2017, we wrote a piece tackling what Brexit was likely to mean for the housing market. At the time, the idea of the UK crashing out of the EU without any kind of agreement in place was hardly considered outside the fantasies of a few hard Brexiters in the European Research Group. How times change. Prime Minister Boris Johnson began last week by insisting that the UK will leave the EU on October 31 st “whatever the circumstances”. Later the same day, European diplomats were quoted on the record that “A no-deal now appears to be the UK government’s central scenario”. And, Johnson’s most senior advisor, Dominic Cummings also started his week by instructing special advisers across government to step up preparations for a no-deal Brexit. All of which points towards the UK dropping unceremoniously out of the EU in just under 3 months’ time – barring a general election, an increasingly unlikely second referendum, or act of divine intervention. But what does this mean for the housing market and, by extension, conveyancers? The Housing Market Depending on where you look, the short-term forecast for the housing market ranges from grim to slightly less grim – something that’s true for both prices and transaction numbers. The Bank of England has described the potential impact of no-deal on the housing market as significant. It went further, saying house prices could plummet by as much as 30% in the event of no deal. Even more conservative estimates from mortgage lender Halifax suggest prices would quickly fall by 5%. This is against a backdrop of already fairly flat growth of around 0.4% for most of the year so far, with Halifax also reporting a slight decline in property prices from June. Alongside this, according to HM Revenue and Customs’ (HMRC) June data, transaction numbers are also falling. The 84,490 residential transactions recorded in June represented a 9.6% monthly decline when compared with May’s figures and a 16.5% reduction in transactions when compared with June 2018. According to analysts, this slowdown is mostly being driven by cash buyers who aren’t subject to chains and have no real pressure to move, and with Brexit creating uncertainty, it’s likely that many are simply opting to wait and see. And That Could Mean Bad News for Conveyancers For conveyancers it’s a simple equation; uncertainty generally means low confidence in the market which in turn means fewer transactions and, ultimately less work. This is likely to persist in the very least until past the October deadline. On a macro level, the legal sector as a whole could stand to be one of the hardest hit in the event of no deal. The UK is currently the second largest provider of legal services globally and the largest in Europe by some way, equivalent to 1.4% of UK GDP and creating an export surplus of £4.4bn as of 2017. However, despite its prestige and vital role in the UK economy, some experts are predicting a no-deal Brexit could cost the legal sector £3.5bn in lost volumes – a 10% decrease on an ‘orderly’ Brexit. This is partly down to the potential loss of access to EU Lawyers’ Directives, which provide EU-wide rights on services and establishment, but also down to the wider economic impact of a deal-free exit such as stagnation of the housing market. But It Probably Won’t Last If you’ve made it this far without considering a career change or beating your head repeatedly on your desk, well done, it’s time for some good news. The last decade of political, economic, and social turmoil has revealed two things about the UK housing market. Firstly, that it hates nothing more than uncertainty. This is obvious, after all, most people don’t make big investments in times of unpredictability. Secondly, the UK housing market has proved remarkably resilient. This was demonstrated by its relatively swift return to form following the 2008 financial crisis. Property remains one of the most stable assets and has always had a propensity for weathering political and economic storms and recovering quickly. If you take a longer-view, you can see that the national average for house prices has actually risen and the market has had stable year-on-year growth for the last decade – despite the Brexit vote. Even the fall in transaction numbers is viewed by most as a temporary blip and explainable as being down to the uncertainty caused by March’s deadline. Most commentators believe that once the Brexit debacle ends – even if that’s with a no-deal – transaction numbers should quickly begin to return as the housing market reasserts itself. On top of this, a decrease in house prices could act as a catalyst at the bottom end of the market, with first- time buyers receiving a timely incentive to get onto the ladder. Alongside this, a decline in the value of sterling could well make investing in high-value commercial and off-plan property more attractive to overseas investors – mitigating a lot of the damage a drop-off in everyday residential transactions. Of course, none of this is to downplay the potential impact of no-deal. The truth is that we just don’t know what will happen and commentators far better qualified than us are struggling to make concrete predictions. However, while the first part of this blog makes for pretty gloomy reading, it’s worth considering the form. The housing market has rallied quickly after far more serious economic shocks than Brexit (2008 being the obvious example) and long-term trends are positive. It’s a little early to be making bold predictions, but just maybe our worst fears might turn out to be little more than that.