...but the downside is that house prices will fall too as market freezes
BUYERS and sellers alike face a period of uncertainty over house prices after the Brexit vote, warn estate agents and property pundits.
Ahead of the vote, the Treasury voiced dire warnings of prices plunging by up to 18 per cent while price indices from lenders Halifax and Nationwide registered slowdowns in the rate that house prices are growing.
For example, the Halifax index for April reveals the smallest quarterly and annual increase for five months. The lender’s figures show prices in the three months to April increasing by 1.5 per cent and 9.2 per cent year-on-year.
Economic uncertainty over Brexit means that consumers are likely to tighten their belts and curb their spending.
This could lead ad to fewer buyers, which will bear r down on demand and prices. Homeowners will be reluctant to sell as it might be harder to trade up if the value of their property has fallen. This has the potential to freeze the market. ket. For those in the e rental market, lack of supply could also push up rents.
The property portal Zoopla warned last week that Brexit could wipe out nearly all the house price gains of the past five years and leave some homeowners in negative equity. The website claimed that average ho house prices of just ove over £297,000 might fall by more than £53,000 due to the combined e effects of u uncertainty, increased unemployment, reduced investment and higher borrowing c costs. A Altogether, an out vote could slash £1.5 trillion off the total value of the UK’s housing stock, Zoopla claimed.claim Richard Donnell, director at analyst Hometrack, predicts a fall in housing turnover and slowing price growth as buyers wait and see how the exit plays out.
He says: ‘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 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.’
Mark Hayward, managing director of the National Association of Estate Agents, says it expects prices and rents to remain stable in the short term.
He adds: ‘We believe the UK housing market is resilient as is the supply chain that drives it.’
But he warns that the bigger negative element might be a skills shortage due to a lack of migrants in the building sector.
Grainne Gilmore, of estate agent Knight Frank, says there could be a fall in transactions and prices as confidence is hit, but uncertainty could also dampen the supply of homes for sale, which would keep prices buoyant.
She says: ‘In the short to medium term, the fundamental demand and supply dynamics are unlikely to change with a continued undersupply of homes across the country underpinning pricing in some of the most desirable areas.’ s.’
Before the vote, ote, many agents andnd some developers said buyers were holding back. London estate agent Jeremy Leaf says he expects this to continue until the pound stabilises.
He says: ‘A prolonged fall in sterling may encourage someme opportunistic foreign investors and owner-occupiers to take advantage of market softening, but overall most will wait to see how far house prices fall, as well as the implications for lending and employment, before taking the plunge.’
Many builders held back developments ahead of the referendum. ‘Real estate markets always prefer certainty,’ says Stephen Solomons of law firm Blake Morgan. ‘The last few months have led to a slowdown in transactions. Now we know the result we expect to see the real estate markets pick up rapidly. ‘Banks are still in the market to lend on the right projects and there is a large amount of private equity cash.’ But he warns that there might be some weakness in the prime office market if companies start relocating. Lucien Cook, head of residential r research for Savills, s says it is impos impossible to pred predict what will hap happen until the w wider e economic effects of Brexit materialise. He says uncertainty among buyers will continue, r restraining pr price growth and transactions in the short term. ‘The p prospect of an increas increase in mortgage inte interest rates and a reduction in wage growth is expected to create greater affordability pressures over the medium term, particularly in London.’ Cook predicts that prime markets such as Central London will feel the greatest short-term impact, but he claims that a fall in the value of sterling may actually bring some international buyers back to the market as it makes UK property more affordable for overseas buyers.