No Brexit hit sees con­fi­dence in­crease in UK hous­ing mar­ket

Financial Mirror (Cyprus) - - FRONT PAGE -

It has been an in­ter­est­ing cou­ple of weeks for the UK res­i­den­tial prop­erty mar­ket with more ev­i­dence that the pre­dicted hit ex­pected from the de­ci­sion to leave the Euro­pean Union has been more of a mild driz­zle than a del­uge or flood.

In­deed, con­fi­dence is re­turn­ing with the mar­ket see­ing an up­turn in Au­gust, ac­cord­ing to the lat­est monthly re­port from the Royal In­sti­tu­tion of Char­tered Sur­vey­ors which is con­sid­ered as an im­por­tant bench­mark for what is hap­pen­ing in the sec­tor.

Over­all, house price rises are re­gain­ing some mo­men­tum and sales are hold­ing steady af­ter some falls and even although the Hal­i­fax in­dex showed a 0.2% fall it still showed an­nual growth of al­most 7% and there is of­ten a slight lull in Au­gust due to the sum­mer hol­i­days.

What should also be noted is that while the RICS sur­vey points out that buyer en­quiries and sales in­struc­tions con­tinue to slip al­beit at a greatly re­duced pace, sur­vey­ors ex­pect that prices and sales vol­umes will rise go­ing for­ward not just in the next few months, but over the next 12 months.

It is also good news that RICS says that the mar­ket is likely to ben­e­fit from a more sta­ble trend in ac­tiv­ity which is driv­ing the im­prove­ment in sen­ti­ment. But there are, of course, re­gional dif­fer­ences, with Lon­don in par­tic­u­lar re­main­ing neg­a­tive for a sixth con­sec­u­tive month.

It is also in­ter­est­ing that land­lords have not been put off by tax changes. The lat­est re­port from Con­nells Sur­vey and Val­u­a­tion says that buy to let ac­tiv­ity in­creased by 12.7% in Au­gust. This sug­gests that the sec­tor has suc­cess­fully ab­sorbed the govern­ment’s 2015 pol­icy changes and even en­joyed a post-Brexit bounce.

Although the re­stric­tion of tax re­lief on mort­gage fi­nance costs to ba­sic rate tax only, the re­moval of the 10% wear-and-tear al­lowance, and the in­tro­duc­tion of ad­di­tional 3% stamp duty sur­charge hit the sec­tor fol­low­ing the 2015 bud­get and the last Au­tumn state­ment, but the re­port ex­plains that the Au­gust re­bound sug­gests the govern­ment’s changes are set to have been a short term prob­lem for the sec­tor.

All of this has been helped by the cut in in­ter­est rates. It was only a few months ago that every­one was ex­pect­ing a rise in rates, but the Brexit vote has put paid to that. It means that it is still cheap to get a mort­gage and that is help­ing first-time buy­ers and so is keep­ing the mar­ket mov­ing.

There is also an en­cour­ag­ing eco­nomic out­look, high lev­els of em­ploy­ment and fad­ing fears of a re­ces­sion and even in Lon­don it is not all doom and gloom. The lat­est re­port from Knight Frank on the prime mar­ket sug­gest that buy­ers are re­turn­ing, with a 22.1% rise in in­ter­est com­pared to a year ago. Price falls in Lon­don are ob­vi­ously at­tract­ing buy­ers again. But the fall in val­ues is not a bad thing. It is still too hard to save for a de­posit if you are a first-time buyer sim­ply due to homes cost­ing so much. A lot is be­ing done to build more af­ford­able homes but a con­tin­ued fall in prices would do no harm.

Go­ing for­ward, the hous­ing mar­ket is likely to tick along nicely. But we must not for­get that there could be some Brexit sur­prises fur­ther along the way if, for ex­am­ple, the jobs mar­ket is hit or wages fall. No one knows the out­come of ne­go­ti­a­tions that are un­likely to start prop­erly un­til Ar­ti­cle 50, the le­gal trans­ac­tion that trig­gers the ac­tual leav­ing of the EU, is ac­ti­vated and there seems to be no hurry with this as far as the govern­ment is con­cerned.

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