Brexit doom and gloom un­likely to hit hous­ing mar­kets in short term

Financial Mirror (Cyprus) - - FRONT PAGE -

It is still too early to know with any cer­tainty how the UK res­i­den­tial prop­erty mar­ket will be af­fected by the de­ci­sion to leave the Euro­pean Union with an­a­lysts no­tably re­luc­tant to call what is ahead.

What is clear, how­ever, is that in the run-up to last month’s polls, there was a slow­ing in the mar­kets due to un­cer­tainty over how the vote would go. Now that we know the out­come, things seem re­mark­ably set­tled.

It is also clear that apart from cur­rency changes mak­ing it more at­trac­tive for for­eign buy­ers due to the Pound fall­ing, noth­ing dras­tic is about to hap­pen in the short term as there will have to be a new Prime Min­is­ter be­fore Ar­ti­cle 50, the move that trig­gers the start of the end­ing of EU mem­ber­ship is trig­gered and that won’t be be­fore Septem­ber.

In the mean­time, all the ‘warn­ing’ head­lines re­port­ing var­i­ous EU lead­ers say­ing that the UK should get on with have fiz­zled out and there are now mur­mur­ings that talks can take place be­fore Ar­ti­cle 50 is in­voked. This is partly due to both France and Ger­many having gen­eral elec­tions com­ing up with their lead­ers want­ing to con­cen­trate on that.

The slow­down, and it is mar­ginal, might ac­tu­ally be a good thing for the res­i­den­tial mar­ket. For ex­am­ple, first time buy­ers in Eng­land and Wales paid an av­er­age of GBP 173,282 to get on the hous­ing lad­der in May, a record high that was fu­elled by in­tense com­pe­ti­tion for prop­er­ties. A slow­ing of price growth could help more first time buy­ers get on the hous­ing lad­der.

This would be good as the data from real es­tate agents Your Move and Reeds Rains also shows that sales in the first time buyer sec­tor were down by 0.8% month on month. This is not sur­pris­ing as the amount paid by first time buy­ers has now in­creased by more than GBP 23,000 in the last 12 months and cur­rent av­er­age prices paid are the high­est on record.

De­mand has also fallen which could boost the first time buyer sec­tor. The lat­est fig­ures from the Na­tional As­so­ci­a­tion of Es­tate Agents show that it has fallen to the low­est level in three years. The ma­jor­ity of es­tate agents be­lieve that de­mand will fall fur­ther in the short term.

Along with fall­ing de­mand in May, the sup­ply of houses avail­able to buy­ers in­creased marginally from 35 prop­er­ties avail­able to buy per branch in April to 37 in May. But this could be sig­nif­i­cant if it con­tin­ues into June which is likely as things would hardly have picked up in the weeks be­fore the ref­er­en­dum. So, June fig­ures will be very in­ter­est­ing. And it is in­ter­est­ing that al­though the num­ber of house hunters reg­is­tered per branch and sales agreed fell in May, sales to first time buy­ers in­creased marginally. Some 27% of the to­tal sales com­pleted last month were to first time buy­ers, an in­crease of 1%.

And the lat­est in­dex from the Na­tion­wide shows that prices edged up by just 0.2% in May and an­nual price growth slowed to 4.7%. Again, it will be in­ter­est­ing to see the June in­dex fig­ures and it is worth re­mem­ber­ing that the an­nual pace of house price growth re­mains in the fairly nar­row range – be­tween 3% and 5% – that has been pre­vail­ing for much of the past 12 months.

I see a pe­riod of sta­bil­ity ahead. We know that in­ter­est rates are not go­ing to rise and mort­gage ap­provals are down in trend terms. There is a lot of po­lit­i­cal tur­moil but once a new PM is in place and he or she sets out the plan for Brexit, what lies ahead will be­come clearer.

Sales ac­tiv­ity could dip and prices re­main static or even fall, but this is no bad thing.

Over­all, healthy labour mar­ket con­di­tions and low bor­row­ing costs are likely to re­duce volatil­ity this year but a lot will de­pend on the econ­omy not fall­ing into re­ces­sion. The out­look is not as bleak as we might have imag­ined.

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