Brexit vote likely to slow housing market
The vote on the UK’s membership of the EU is likely to slow the UK’s housing market as part of a wider slowdown according to experts.
Housebuilders have been particularly hard hit with shares in the UK’s two biggest builders Barratt and Persimmon falling by a huge 21% and 24% by 11am.
Eddie Goldsmith, Chairman of the Conveyancing Association however was upbeat, said: “At the June meeting of the Conveyancing Association there was overwhelming support to remain in the EU. This was based on the need for stability in the economy which feeds through to the housing market. Borrowers who are looking to make the biggest financial decision of their lives want to see and feel that nothing is likely to risk their jobs or increase their mortgage payments .
“A Vote for Leave unfortunately creates that type of uncertainty because the eventual result of the negotiations, and the UK’s economic position in this new world, are (at the moment) unknowable. There is therefore likely to be a period of nervousness in the housing/mortgage markets which could last for a number of months – for instance, we could see a reduction in housing transaction numbers until consumers/borrowers are more certain of what the position is.
“However, once this has settled down, I anticipate the market picking up again later in the year. People will still need to move, lenders will still need to lend and with mortgage pricing remaining highly competitive this could actually prove to be a good buyer’s market. With the ball being in the buyer’s court we may well see some hard negotiation on prices resulting in a short-term fall. In terms of Bank Base Rate I suspect it will stay the same for the immediate future however the Bank of England MPC does have the option to cut it further later in the year should it feel the need to stimulate the economy.
“As always the housing market across the UK is different, region to region. The London market, for instance, may well gain a significant short-term boost because of the weak pound although I suspect foreign investors will also want to wait to see how the market plays out. Across the rest of the country it is difficult to predict how the market will change but it will undoubtedly have to adapt.
“In all there is likely to be a little short-term pain because of increased uncertainty – the extent of this is however dependent on any number of variables. What we should however guard against is media sensationalism creating widespread panic which effectively talks us into another recession; instead, with the vote being what it is, the powers that be have to bring as much stability and certainty to the overall economy and the markets as possible to make sure the predictions of doom do not come to fruition.”
Richard Donnell, insight director property market analysts Hometrack expects a slowdown in volumes and prices as buyers wait to see what the effect on prices is, with the tumble in the value of sterling doing little to attract more investment.
Richard Donnell said: “The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short term impact on financial markets and the economy at large.
“The decision to leave the EU will be most keenly felt in the London housing market which is fully valued and already facing headwinds.
“History shows that external shocks can reduce sales volumes by as much as 20 per cent with sales volumes already down over the last year.
“House price growth is already weak and running in low single digits in central London areas and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity.
“Even a sharp fall in the Sterling is unlikely to attract overseas buyers in the near term.
“Across London, where house price growth is running at 13 per cent, we expect the rate of growth to slow rapidly on greater uncertainty and market activity in the capital is set to remain disrupted until consumers and the financial markets can see a clear strategy to manage the process to a position where the outlook for the economy, jobs and mortgage rates becomes clearer.”
Doug Crawford, CEO of My Home Move said: “As we know from our own research, people choose to move home for many different reasons – many of which are unlikely to be affected in the short term by the outcome of the EU Referendum. This decision has been made against the backdrop of a UK housing market that is, arguably, leaner and fitter than at any point in the last 15 to 20 years.
“A strong regulatory structure, in particular through MMR, has meant we have sensible lending and the heat has already been taken out of the Buy to Let market with the most recent SDLT changes. Combine these factors with strong rental demand in the Private Rented Sector and an acute shortage of housing stock relative to the UK’s needs and it all suggests a stable market in the medium term.
“Due to the continued investment we make in technology, operational structures and the expertise of our conveyancers, My Home Move is well placed to adapt to any changes in the market over the longer term. We have seen our business grow through difficult and challenging times, to be able to complete more cases in a single month than 99% of firms can complete in a whole year. And while there is uncertainty around the effect the ‘out’ vote may have on the economy, we are committed to revolutionising the customer experience of conveyancing for the tens of thousands of people who use our services each year.”
David Cox, managing director of Association of Residential Letting Agents (ARLA) and Mark Hayward, managing director of National Association of Estate Agents (NAEA), said: “The outcome of today’s EU referendum will create a period of uncertainty among homeowners, buyers, investors, landlords and developers. We can expect international investors to look a lot harder at the UK as a market; this will have a consequential impact upon the house building sector as investment may be stalled.
“In the short term we believe that both prices, and rents, will remain stable, but we cannot be certain about the next quarter as political instability, and market unrest, could lead through into prices in the housing market. We believe that the UK housing market is resilient, as is the supply chain that drives it. But as we indicated in our Brexit report1 last month, the bigger impact may well be in the skills necessary to drive UK housing development, and this is now a major concern for UK buyers and renters.”