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CEBR: hard Brexit could 'severely limit' construction market
A tougher stance on immigration as a result of Brexit would “severely limit” the capacity of the UK construction market, with the potential to further deepen the housing crisis, according to research published today.
Consultancy the Centre for Economics and Business Research (CEBR) said UK house price growth would accelerate from 6% in 2015 to 6.9% in 2016 before slowing to 2.6% in 2017. However, with 9% of UK construction workers being EU nationals, a ‘hard Brexit’ could put upwards pressure on house prices in the longer run.
It said that despite prices remaining relatively robust in the context of post-referendum “tremors”, if the UK government follows through on its promise to substantially curb immigration from 2019 onwards, this could “directly affect household creation and have a negative effect on housing demand in the outer forecast years”. However, the consequences of this ‘hard Brexit’ scenario on housing are “ambiguous” due to the decrease in construction skilled workers that this tough stance on immigration could herald.
The forecast shows house price growth gradually tailing off after 2019, with year-on-year price increases set to move from 4.6% to 4.4% in 2020, and 3.9% in 2021, when the CEBR predicts the average house price would reach £254,000.
In the shorter term, during the fourth quarter of 2016, Brexit uncertainty is predicted to deter potential buyers, leading to slower year-on-year price growth of 4.5% in the fourth quarter, compared with 6.9% in 2016 overall. In London, a fall in house prices of 5.6% is predicted during 2017, especially at the prime end of the capital’s housing market.
Kay Daniel Neufeld, CEBR economist and author of the report, said: “After the Tory party conference in Birmingham, a so-called ‘hard Brexit’ scenario in which the UK loses access to the single market due to the introduction of immigration restrictions has become more probable. The consequences of this are ambiguous: if immigration is reduced drastically, pressures on house prices could ease in certain areas. However, as the construction sector relies on immigrant labour skills, the UK might find it difficult to build the required number of houses to address the shortage we currently see in the market.”
