Brexit has adverse affect on British property market

There were warnings in the months leading up to the referendum that the property market in Britain could be severely affected by Brexit and while there is little sign of a crash, there is certainly a slowdown in the market with the capital city being the first to feel the affect. House prices in London are set to suffer a more severe blow than any other part of the UK, according to the first major survey to be conducted after last month’s shock vote to leave the EU.

Chartered surveyors in London in particular, expect prices to tumble during the next 12 months, as post-referendum fears take hold of the property sector.

Across Britain as a whole, surveyors report that the level of interest from prospective homebuyers has fallen to its lowest level since the days of the global financial crisis eight years ago.

The research published by the Royal Institution of Chartered Surveyors (Rics) shows that London housing sector will feel the brunt of the downturn in the market.

Over the next three months, 54 per cent more respondents in London expect to see prices fall rather than rise — a worse ratio than in any other part of the country.

A balance of 39 per cent of surveyors believes that prices in the capital will fall during the whole of 2017.

A spokesman from Rics said that the poll was conducted once the outcome of the referendum was known.

Prices have already started to drop, according to Rics.

The report said: “London has been one of the areas hardest hit with anecdotal evidence suggesting both the EU result and the tax changes, which took effect at the beginning of April, at the start of the current financial year, as having an impact on sentiment.”

A lack of confidence in the capital is also set to affect the number of properties that come to the market. “Fifty-five per cent more chartered surveyors saw a fall in new instructions to estate agents rather than a rise last month,” the report said.

This was a sharp increase from a balance of 29 per cent in May and, in fact, in April, surveyors reported a rise in new instructions.

Rics data shows that, even if prices decline over the next year, they are still expected to be higher in five years’ time from now.

A balance of 12 per cent of surveyors think prices in the capital will increase over the next five years.

Across Britain as a whole, a positive balance of 14 per cent of chartered surveyors believes that prices will grow over the coming five years.

Chief economist at Rics, Simon Robinsohn, said: “The critical influence looking further ahead is how the economy performs in the wake of the uncertainty triggered by the vote to leave.” Housing activists argue that more properties need to be built, particularly in London irrespective of short-term movements in prices.

Britain needs at least 300,000 new homes a year to fix its housing crisis, according to a House of Lords report which calls for a building boom, but raised controversy by arguing that the private sector “has neither the ability nor motivation” to satisfy demand.

The cross-party Economic Affairs Committee has called for local authorities and housing associations to be “incentivised and enabled” to add to the housing supply.

However, some housing campaigners expressed dismay that strict planning laws did not feature more prominently in the report.

Director of PricedOut, Duncan Stott said: “The only way we can build 300,000 homes per year is if over 300,000 homes are given planning permission each year. Local councils that control planning policy must listen to younger workers struggling with high rents.”

MPs have started an inquiry into the UK’s housebuilding sector, seeking answers on why supply cannot keep up with demand to produce homes the country needs.

The Communities and Local Government (CLG) committee will be calling the chief executives of major developers to give evidence on the industry’s capacity to meet the housing demand all over the UK.

CLG committee chairman Clive Betts MP said: “The committee will cast a critical eye over the major housebuilders, examine the decline of small and medium-sized developers and look closely at the skill shortages, planning delays and finance issues hampering the industry.”