Can prop­erty come through the Brexit uncer­tainty?

Sunday Express - - COMMENT - By Har­vey Jones

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.”

WIN­TER BLUES

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.”

FEEL­ING DOWN

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’

MORE UNCER­TAINTY

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.

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