In the wake of a majority of the UK people voting to exit our membership of the European Union it could be testing times for the property market and the potential Brexit effect on house prices. Whilst it is too early to be sure of the full impact of the Brexit effect we take a look at the latest opinions from the property market.
The Nationwide House Price Index for June reports UK annual house price growth increased to 5.1% in June (0.2% monthly change) and that the average property price is now £204,968 (up from £204,368 in May).
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “Ultimately conditions in the housing market will be determined by conditions in the wider economy, especially the labour market. It is too early to assess the impact of the referendum vote on the economy.
However, it is encouraging that the labour market had remained robust in recent months, with solid employment growth and the unemployment rate declining to an eleven-year low in April. Borrowing costs also remained close to historic lows. Moreover, the lack of homes on the market – with estate agents continuing to report a record low number of properties on their books – will also provide underlying support for prices even if demand softens.”
The Halifax House Price Index for June shows that prices were 8.4% higher than in the same three months of 2015 and 1.2% up on the preceding three months. Martin Ellis, Halifax housing economist, said: “There is evidence that the underlying pace of house growth may be easing.
House prices in the three months to June were 1.2% higher than in the previous quarter; down from 1.5% in May. The annual rate of growth fell from 9.2% in May to 8.4%; the lowest since July 2015. “House prices continue to increase, albeit at a slower rate, but this precedes the EU referendum result, therefore it is far too early to determine any impact since.”
The Governor of the Bank of England, Mark Carney, has recently urged the property buying public to be prudent and not panic – “If you are taking out a mortgage, at some stage during the life of that mortgage, conditions will be difficult. You want to be able to ensure that you can service that mortgage even if times are tough, so think about where interest rates will go, where wages will go in the lifetime of that mortgage” said Carney.
The RICS Market Survey June - Brexit Effect
The RICS UK Residential Market Survey for June 2016 highlights some post Brexit effect uncertainty. They report that buyer enquiries are down for the third consecutive month, agreed sales falling sharply and expected to remain subdued and medium term price slim expectations but remain positive with rent expectations still firm. All good news for first-time buyers but will not be greeted well by those in the property industry. The dip in house prices is only expected to persist over the next year in London and East Anglia.
The erosion of buyer confidence has led to a significant moderation in price growth and in June, 16% more of their respondents reported prices have risen rather than fallen over the previous three months. This is down from an average of around 50% at the start of the year. You can read the whole report here.
So as the dust settles we have seen varying reports from estate agents that the Brexit effect has led to some buyers withdrawing from their proposed purchase, delaying their decision or asking for a price reduction – whilst many have not seen any particular change and it has been business as usual. Many are also reporting a positive reaction with international buyers taking advantage of the weakened pound. We continue to follow the news and the Brexit effect on house prices with great interest…
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