Housing market 'settles down' post-Brexit, says RICS
House prices and sales will likely continue to rise in the aftermath of the Brexit vote, with prices predicted to go up by 3.3% a year over the next five years, according to the latest poll of surveyors.
The Royal Institution of Chartered Surveyors (RICS) found that a higher proportion of surveyors expected sales to rise in the next three months than at any time since February.
And while the number of house sales continued to fall in August, it was at a slower rate than immediately after the EU referendum in June.
Simon Rubinsohn, chief economist at RICS, says: “There are clear signs that the housing market is settling down after the initial surprise of the outcome to the EU referendum.
“Buyer enquiries did dip again in August but only modestly and, more significantly, sales expectations are beginning to edge upwards once again. It is likely the swift response from the Bank of England, both in terms of the lowering of the capital buffer and the cut in interest rates, has played a role in helping to support confidence.”
The poll suggests that both prices and sales are set to rise over both the next three months and 12 months as market activity becomes more stable.
While surveyors reported price increases in most parts of the UK, in London the picture was less positive, with 30% more surveyors reporting a drop in house prices in August, as opposed to a rise.
In general, surveyors are more confident about the future though, with 10% more respondents anticipating house price growth over the next three months rather than prices falling.
Price expectations for the next 12 months are also more positive, with surveyors anticipating modest increases in most parts of the country outside London.
Shortage of housing stock
RICS reports that the volume of agreed house sales stabilised in August, with its agreed sales indicator rising from -32% to zero.
It suggests that the continuing shortage of housing stock has had a knock-on effect on rising prices. Surveyors report a drop in the number of houses on estate agents’ books for the third month in a row, nearing December’s record low.
Surveyors also reported a drop in demand for homes from new buyers although the pace of this decline has eased. A net balance of -7% more chartered surveyors reported a fall in demand in August – up from -25% in July.
‘Could be the beginning of choppy market conditions’
Commenting on the report, Andrew McPhillips, chief economist at Yorkshire Building Society, says: “Activity in the housing market appears to have recovered following uncertainty caused by the EU referendum and the effects of the increase in stamp duty for landlords.
“Although these statistics, along with other favourable economic reports for August, paint a positive picture, they could also be seen as the beginning of the choppy market conditions we are likely to see in the medium term as a result of people’s uncertainty around how post-Brexit UK will look.
“Despite wider economic uncertainty, the main constraint in the housing market is the lack of supply, which will cause house price inflation to grow at a steeper rate in response to increasing levels of demand. In order to make properties more affordable, the UK needs to build more properties and remove other financial barriers for first-time buyers and those moving home in order to accommodate increasing levels of demand in the long term.”
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.