Leave vote set to put housing deals on ice

UK-Houses

Brexit uncertainty is likely to put the brakes on the UK property market, with transaction volumes potentially falling by up to 20 per cent, experts warn.

Housing market pundits remain split over whether or not prices will fall in the long-term.

Some believe the lack of supply of new homes will help to underpin values, while others argue the movement of City high flyers to other financial centres like Paris will result in costs falling.

Some argue the combination of an extremely weak pound and short-term house price falls may lead to more foreign investors seizing the opportunity to buy property in the capital, but others say this will not be enough of an incentive given long-term uncertainty.

Hometrack insight director Richard Donnell says: “The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short term impact on financial markets and the economy at large.

“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 sales volumes already down over the last year.”

He adds: “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.

“Even a sharp fall in sterling is unlikely to attract overseas buyers in the near term.

“Across London, where house price growth is running at 13 per cent, we expect the rate of growth to slow rapidly on greater uncertainty and market activity in the capital is set to remain disrupted until consumers and the financial markets can see a clear strategy to manage the process to a position where the outlook for the economy, jobs and mortgage rates becomes clearer.”

Dragonfly Property Finance managing director Mark Posniak says: “Caution, reduced transaction levels and downward pressure on prices in the months ahead are almost certain but we should not write off the property market.

“Despite the magnitude of the result, the structural supply issue underpinning the UK’s property market may well prevent prices falling materially.

“Overseas demand may also increase on the back of the decimated pound. For many overseas investors, buying British property just got a lot cheaper.

“Short-term liquidity issues are possible, if not likely, among bank lenders and non-bank lenders that have bank funding lines.”

Assetz Property chief executive Stuart Law urges buy-to-let investors to look beyond the capital to the so-called “Northern Powerhouse” for potential opportunities and says that prices are likely to be more stable outside London.

He says: “We still expect prime London prices to continue falling and many of the tens of thousands of luxury homes in the pipeline to be mothballed as demand from all over the world fails to meet that potential level of supply.

“The rest of London will definitely be hit by a perfect storm of several factors hitting house prices which is great news for house-buyers but not for investors and homeowners.

He adds: “We know that the City is going to relocate large numbers of highly paid bankers to Paris, Dublin and the rest of Europe and the loss of these highly paid house buyers and renters can only have a negative effect.

“Add that to the new buy-to-let mortgage interest tax and we see no appeal for speculative house price growth and negative cash-flow in London for the foreseeable future.”