Following the 2016 Brexit vote, UK economic growth performed better than most expected. However, the results of Q1 GDP in 2017 have indicated that this has now started to plateau.

Recent events and uncertainty in the UK have adversely impacted the economy in various ways: Brexit, the general election, the increasing deficit between rising inflation and wages, and affordability in the housing market being close to an all-time low in certain parts of the country. Because of this, it’s no surprise that households have tightened the purse strings and we have experienced a drop in economic growth. Despite predictions for the overall growth for the year being upgraded by the British Chambers of Commerce from 1.1% to 1.4%, it is still expected to remain well below its long- term average over the forecast period.

Quarterly GDP is often subject to revision and Q1 has been slow on growth for the last couple of years, followed by a stronger Q2, so it may be slightly premature to make any definitive conclusions about what the future may hold. Once political events and the recent changes to taxation finally settle, we might start to get a clearer picture of how the UK economy will be able to move forward. However, with Brexit negotiations likely to go on for the next two years, we could be a long way from seeing what the exact impact is. With regards to the UK property market, recent statistics have indicated that mortgage applications are down in conjunction with a slowdown in house price growth, the biggest contributor to this being the greater London region.

Despite this, it’s still too early to conclude if this decline will continue. Q1 2016 also saw a rush in activity when investors and second home buyers were frantically trying to complete their purchases to avoid the changes in ownership and taxation, and this could explain some of the disparity we have seen. Although the property industry has been dealt a fair few blows, including recent changes to the buy-to-let industry, overall demand is still outweighing supply and rock-bottom interest rates have ensured a continued slow but steady increase in prices throughout the country (bar London), which in turn is supporting the appetite for lenders and developers to remain fairly active within the industry.

In the event that GDP growth continues to slow or even decline in the following quarters, a knock-on effect would likely be felt within the industry. We could see lenders readdress their appetites and home owners battle further with the negative impact of rising inflation and stagnant wages. While the credit markets remain fairly liquid at the moment, it would be very much expected to see a correlation between negative GDP and a slowing credit market, which in turn could lead to a slowdown in the development sector.

Like most markets, the housing and development industry is extremely cyclical and has experienced strong growth over the past few years. But we now find ourselves at a fragile point in the market where political and economic factors could slow the industry and result in continued poor GDP results like we have seen in Q1.

While we are in a period of such unprecedented uncertainty in the UK, it is practically impossible to predict any sort of outcome. But looking at the bigger picture, the UK’s population is growing, and the general consensus is that demand for housing still outweighs supply, therefore creating a solid, long-term base for the industry over the years to come.