It’s almost three months since Britain voted to leave the EU, so how is the property market performing following Brexit uncertainty?
The CEO of the HomeOwners Alliance, Paula Higgins, takes a look at where we are now, in terms of house prices, housebuilding and mortgage finance:
This month, many of the UK’s largest housebuilders insist that it is “all back to business as usual”. This is mainly because the long-term shortage of housing supply means that the hiccup following Brexit uncertainty was just that – a hiccup. Demand for housing in the UK remains unaffected, says Higgins.
Fewer homes were purchased both pre-Brexit and in its immediate aftermath, as potential homebuyers adopted a wait-and-see approach in regard to house prices, employment and the economy at large. Vendors, worried about the lack of interest, lowered their prices to secure a sale. Higgins claims that the ball has landed just inside the buyer’s court for the first time in years, and looks likely to remain there for some time.
Additionally, the introduction of the 3% Stamp Duty surcharge on additional homes in April has curbed the enthusiasm and finances of many buy-to-let landlords.
The Bank of England’s base rate cut to 0.25% in August has reduced mortgage rates to the lowest level for many years (the base rate was 5.25% in 2008 when the credit crunch began). This means that it is an extremely good time to remortgage, with the biggest bargains on two, five and ten-year mortgages.
However, first time buyers may not feel quite so buoyant. This is because the number of 95% mortgages has dropped considerably, although this did begin a couple of months before the Brexit vote. According to Moneyfacts, small deposit mortgage lending has fallen by 3.5% on last year.
House prices are similar to what they were before the referendum, reports Higgins, although the number of property sales continues to drop. However, the Royal Institution of Chartered Surveyors (RICS) believes that continued under-supply means that they are expected to rise in the coming months, albeit at a much slower pace than at the start of the year. The organisation predicts a rise of 3.3% per year over the next five years.
A recent report from Halifax claims that the average UK house price in August was £213,930, up by 6.9% on the same period in 2015.
However, prices in the prime parts of London continue to drop, while the rest of the capital is expected to remain stable for some time (some property analysts believe it will be steady for up to a year).
With sterling performing poorly in terms of exchange rate, UK property – in London in particular – continues to remain extremely popular for foreign investors, especially those from China and the Middle East.
Despite this, the focus of these investors isn’t the same as it was this time last year. They too are feeling the Stamp Duty surcharge effects, to the extent that it has encouraged many to lower their property price point. This means that many overseas investors are now competing with first time buyers from the UK.
But how will things work out for the property market as the Brexit circus continues? Higgins insists that it is difficult to tell. From where things currently stand, she says, there doesn’t look to be much change, and if there is, it could take time to filter through. She does believe that life is now a bit more comfortable for homebuyers than it previously was, although encourages buyers and sellers to stick to their plans and get moving as soon as possible – unless they have two to three years to see how things work out.