House price falls triggered by weaker economic growth and a drop in economic confidence following the EU referendum may not actually help would-be buyers.
That is the conclusion of the Resolution Foundation, a think tank that in the past has called for more homes to be built to help solve the housing crisis.
Now its website, in a blog posted yesterday, says that on the surface, low and middle income households who cannot afford to buy might appear to be beneficiaries of a Brexit-induced drop in house prices.
But it warns that part and parcel of the likely Brexit fall-out is a possible long-term fall in the number of migrant workers in the construction industry, thus reducing house building, and the reduced confidence in the market is likely to mean fewer people will sell – meaning supply will be relatively low, bolstering prices.
In addition, Brexit may dampen wages too – meaning that affordability is no better, even if prices fall.
“It is not the absolute price of housing that matters but the cost of housing relative to income. The earnings outlook for low and middle income households was weak pre-Brexit; arguably it is now weaker still. To state the obvious, cheaper houses are of no benefit to households who have less than ever to spend. Ultimately it is clear we cannot rely on the (uncertain) house price effect of Brexit to solve the endemic housing affordability problem we have in the UK” the think tank concludes.