UK Fears Housing Market May Collapse

Bank of England chief Mark Carney has warned a hard Brexit may mean a UK housing price collapse. The usual Brexiteers were united in disparagement, but his words carry weight on the 10th anniversary of the last crash.

Carney on Thursday reportedly warned UK ministers that the impact of a no-deal (or ‘hard’) Brexit could be as bad as the 2008 financial crisis, with house prices falling by up to 35% over three years in a worst case scenario, DW reported.

As the UK prepares to leave the EU next March such an exit would lead to higher unemployment, a fall in the pound, drive up inflation and in turn interest rates and many homeowners could be left in negative equity, The Financial Times reported Carney as saying.

“Our job is to prepare for the worst, not hope for the best,” Carney wrote in an opinion piece on Friday for The Daily Mail. “By identifying the risks and coming forward with solutions, the bank is working hard every day to get our financial system in shape for Brexit, whatever form it takes.”

A no-deal Brexit means a move from seamless trade with the rest of the EU to customs arrangements set by the World Trade Organization for external states with no preferential deals.

UK house prices fell 19% during the 2008 financial crisis, before rising 38% from their low in March 2009 to June 2016, the month of the Brexit referendum and in the two years since prices have risen by a further 7%, according to Office of National Statistics data.

The world’s fifth-largest economy is heavily indebted and housing has traditionally been used as a form of asset investment by ordinary Britons borrowing from the banks.