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How Brexit could affect house prices and investments

Your key questions answered

From property to investments and the outlook for the economy, we look at how Brexit could affect your financial plans.

Have house prices been affected by Brexit?

The housing market continues to be more heavily influenced by COVID-19 – and measures taken to mitigate its effects, such as the stamp duty holiday on properties worth up to £500,000 – than by Brexit.

Figures show a 4.3% year-on-year increase in house prices in December 2020, the biggest since April 2017 and up from a 1.3% annual rise in the same month in the previous year, according to a report released by Hometrack.1

On a regional basis, prices in the North East, North West, and Yorkshire and the Humber were all growing at the fastest pace for a decade, with those in top performing cities Liverpool and Manchester growing at 6.3% and 6%, respectively.

“The housing market originally felt the weight of the decision to leave the EU largely due to the degree of uncertainty that it provoked,” says David Hollingworth, Associate Director, Communications at broker L&C Mortgages. “As the decision to leave and the election result began to draw that uncertainty to a close, there was an increase in activity, dubbed the Boris bounce.

“Of course there still remains some uncertainty in how Brexit could play out but the pandemic has possibly forced that concern further back in homeowners’ minds. Mortgage rates are likely to remain cheap and that will help support activity in the market. However, the general health of the economy as we move deeper into 2021 will play a key role in how confident homebuyers feel.”

Read our moving home guides.

If you’re thinking about remortgaging, find out about the different options available.

 

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Will I be affected if I own a second home in the EU?

If you have a second home in the EU, you could face restrictions in the amount of time you're able to stay there.

UK citizens are able to travel to most EU countries – along with Iceland, Liechtenstein, Norway and Switzerland – for up to 90 days in any 180-day period. To stay longer, you may need to apply for a visa.

For most of these countries, the time you spend in the EU as a whole counts towards the limit. However, Bulgaria, Croatia, Cyprus and Romania have their own separate 90-day limits and the amount of time spent in other EU countries doesn’t affect how long you can stay in any of these.

Travel to Ireland is not affected, so if your second home is there you won’t face any new restrictions on time spent in it.

If you rent your second home out, you may have to pay a different level of income tax to what you used to pay if the country your property is located in has a different rate for EU and non-EU residents.

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How has the pound reacted since the EU referendum?

When the EU referendum result was announced in June 2016, the pound fell against the euro and, while it has fluctuated in value since then, it’s remained below the level it was before the vote was held over four years ago. It’s a similar story when looking at the value of the pound compared to the US dollar.

The highs of June 2016 have yet to be seen again, although they came close to being reached in April 2018.

However, since September 2020, the pound has been on a broadly upward trend against both the euro and the US dollar.

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What should I look out for with my investments?

The FTSE 100 index of the biggest companies in the UK has risen since the EU referendum result in 2016, although not without experiencing some significant dips. It climbed from 6,138 on 24 June, 2016 to 7,424 a year later, boosted by the fall in value of the pound which made companies in the index more competitive.

There were fluctuations in the period since then until there was a sharp fall in March 2020 as the COVID-19 pandemic hit share prices.

But if you have a diversified portfolio of investments, Brexit may not have a significant impact on your portfolio. Either way, sticking with a long-term approach is key with any kind of investments, especially during times of economic uncertainty.

Will Hobbs, Chief Investment Officer at Barclays Wealth and Investments, explains

“A Bank of England study from a few years back found that around 90% of the variation in UK stock prices can be explained by factors external to the UK economy. There are some caveats to make here all the same. The further down the size spectrum you go, the more of a role the UK economy tends to have.

“With regards to Brexit specifically, there is potentially a case to be made that many international investors have preferred to leave the UK alone or run lower exposures over the last few years. If there was to be a trade deal with the EU, we could see some correction of this underweight position – if indeed it exists.”

Past performance of investments is not a reliable indicator of their future performance. The value of your investment can fall as well as rise.

Read our guide to the impact of Brexit on investments.

Listen to the ‘Word on the Street’ podcast from Barclays Wealth Management for the latest updates on Brexit and financial markets.

The information contained in this article is for general information purposes only and is not intended to constitute financial advice. Please seek independent professional advice relevant to your circumstances. Barclays does not accept any liability for any losses as a result of relying on the information contained in this article. All opinions and estimates are given as of the date of publishing.

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Other Brexit resources you might find helpful

                                                                                                                                             

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