Can property come through the Brexit uncertainty?
THE UK property market has somehow held firm despite the intensifying crisis surrounding Brexit, but now it is finally beginning to show signs of fatigue as buyers and sellers lose their nerve.
The year is drawing to a close with our exit from the EU a little over three months away but with still no clear way forward, and the anxiety is beginning to sap housing market sentiment.
Latest figures show vendors are reluctant to put their homes on the market while buyers are unwilling to part with their money at today’s prices, in case 2019 brings disaster.
Alarmist warnings from Bank of England Governor Mark Carney that prices could drop by more than a third over three years in a worst-case disorderly Brexit have done nothing to soothe nerves. So could the property market finally crash?
The average UK property costs £232,554, up threefold in the last 20 years, from an average of £72,469 in 1998, according to Land Registry figures. Now prices are under increasing strain, with £1.6 billion wiped off values over the past year.
Shaun Church, director at Private Finance, said Brexit uncertainty is largely to blame: “With the political landscape and economy volatile, many buyers, sellers and investors are adopting a wait-and-see approach that is dampening the market.”
As a hub for foreign investment, London has fallen 5 per cent in a year, and will continue to struggle. Church said: “Even if the UK secures a favourable deal, it is likely to take a number of years before confidence returns to pre-referendum levels.”
Pessimism intensified in November, according to the Royal Institute of Chartered Surveyors (RICS), which predicts that sales and prices will fall over the next three months. The average home now takes four months to sell, the longest period since it started collecting records two years ago.
Gary Barker, chief executive of estate agency software supplier Reapit, said its own figures show instructions in November were down 7 per cent on a year ago: “While the market generally slows in December due to seasonality, this a big drop for November.”
The longer Brexit drags on, the worse it will get, said Nick Leeming, chairman of estate agency chain Jackson-Stops: “The possibility of a second referendum would only prolong the uncertainty and infighting. With every minute we are kept waiting on an outcome, confidence dwindles.”
He said the Government needs to focus on getting the best deal possible, which would revive both buyers and sellers: “Until a deal is agreed nothing is guaranteed.”
Brexit is not the only reason for stagnation, with Leeming blaming prohibitive stamp duty charges for scaring away buyers.
Estate agency Chestertons managing director Guy Gittins said tax charges on second properties have also played a part: “The clampdown on buy-to-let has driven away amateur investors.”
The slowdown is having a knock-on effect on other parts of the economy too. New housing orders fell more than 5 per cent between July and September, and Mark Dyason, managing director of development finance broker Thistle Finance, said this paints an ominous picture for
2019: “Deal, no-deal or somewhere in between, it is going to be a challenging year for the construction industry. Fewer developers will buy sites and hire contractors if they expect to struggle to sell all of their units.”
Corporate insolvencies are already rising among construction firms, estate agencies, architects and retailers of white goods that people buy when they move home, such as fridges and washing machines, according to accountancy firm Moore Stephens.
Partner Lee Causer said after a long run of house price increases people have forgotten what a correction looks like: “A large amount of people’s wealth is tied up in house prices and when they fall it drags down consumer confidence.”
Collapsing residential property prices can put the whole economy in a tailspin, he said: “A domino effect of insolvencies created by a disorderly Brexit appears likely to be very painful for the rest of the UK economy.”
‘With the political landscape and economy volatile, many are adopting a wait-and-see approach’
It is not all doom and gloom, as homeowners are taking advantage of continuing low interest rates to cut costs by remortgaging to cheaper deals. Keith Haggart, managing director at Responsible Lending, said: “Frenzied competition between lenders is driving a tsunami of activity as borrowers lock into today’s extremely attractive rates.”
Some first-time buyers are also taking advantage of lower prices finally to climb onto the property ladder.
Jonathan Hopper, managing director of Garrington Property Finders, said today is a buying opportunity for some: “Those who are able to make chain-free, cash offers for homes in good areas can secure discounts.”
Sellers who need to move urgently are often having to accept substantial reductions as a result. “Others are hunkering down and waiting until things improve before listing their home for sale,” he added.
That may be your best option right now, with Jonathan Samuels, chief executive of property lender Octane Capital, warning that 2019 could be
2009 all over again, with prices falling sharply: “All the ingredients for extreme uncertainty, both political and economic, are in the mix.”
Two decades of rising prices could come to an end unless politicians can stop fighting among themselves and get Brexit sorted now.