First-time home buyers may be excited that U.K. home prices could soon fall in the wake of "Brexit."
But it's not all good news for potential home buyers.
The country's vote to leave the European Union has resulted in extreme economic and political uncertainty, which could weaken the U.K. economy, hurt jobs and lower house prices. Already, there are signs of trouble in Britain's commercial property market, with investors trying to pull out of the sector.
But even if home prices drop by 10% to 20%, buyers -- and first-time buyers in particular -- could still face trouble.
Overall uncertainty and market volatility could lead banks to tighten their lending standards, said Paul Donovan, a global economist at UBS in London. This could slow down or stop many home purchases, he warned.
"Your ability to buy a house at all depends on your ability to get a mortgage. And how much you pay for a house is directly related to how large a mortgage you are able to get," Donovan said. "A drop in house prices is not to your advantage. It's indicative of the problems you're facing."
But the Bank of England is doing everything in its power to ensure that money keeps pulsing through the financial system during these uncertain times. Governor Mark Carney said the central bank could lower interest rates further in the coming weeks and months, which would encourage banks to keep lending.
"A property price drop of 10% to 20% makes it a better time to buy than before the fall, if you have mortgage availability and if rates stay low or fall further," noted Philip Shaw, chief economist at Investec in London.
Will foreigners flee?
Donovan predicts that prices in London and the rest of the U.K. could fall if foreign owners decide to offload their British property if they feel the investment environment has become too uncertain and unwelcoming. That might provide a good one-off buying opportunity for locals, he said.
But a lower level of investment from foreigners and immigrants would also put a damper on any potential price appreciation over the next few years, he warned.
The weakening British pound also plays a role in supply and demand. The currency has tumbled by as much as 15% versus the U.S. dollar since the "Brexit" vote. This could draw in international real estate investors attracted by bargains, which would support the market and prices.
The expected shake-up in the U.K. housing market is sure to breed uncertainty for some time. So any first-time buyer should use caution and avoid jumping into a deal too quickly.
"Be selective, do your research, negotiate hard," advises Jeremy McGivern, founder of the U.K. property search agency, Mercury Homesearch. "Just because something has had a price reduction, doesn't mean value. The initial price might just be wrong."
Shaw also warns that anyone intent on buying a home must be willing to stick around for a few years, since there is the risk that prices could decline further, leaving homeowners in an "equity trap" -- or underwater mortgage -- where the price of a home falls below what's owed on the mortgage.
The latest data from the U.K. Council of Mortgage Lenders show that nearly 313,000 new mortgages were granted to first-time buyers last year -- or 46% of all new mortgages. The average first-time buyer was 30 years old and made a down payment of 17% of the purchase price. These combined first-time buyer mortgages were worth £47 billion ($61 billion).