Estate agents have been giving their reaction to the Brexit referendum result, warning that it will lead, at the very least, to uncertainty in the housing market as buyers and sellers adopt a wait and see attitude to the housing market.
Jeremy Leaf, a former RICS chairman and north London estate agent, says: “The only certain point about this outcome is that there will now be uncertainty. There's no doubt that uncertainty causes inaction, with some of our customers sitting on their hands in recent months.
“As we've voted to leave the EU, we're now in unknown territory. Both local and foreign-based customers have told us over the past few months that, until the value of sterling stabilises, decision-making will pause. A prolonged fall in sterling may encourage some opportunistic foreign investors and/or owner occupiers to take advantage of market softening, but overall most will wait to see how far house prices fall, as well as the implications for lending and employment, before taking the plunge.
“In the medium to longer term, the underlying strength of our economy will drive activity and investment. The UK and particularly London property markets are long established and sophisticated, so have always attracted investment and should return to some form of normality, whatever that means now, after an initial period of indecision.”
Nick Leeming, chairman at Jackson-Stops & Staff, agrees that uncertainty is likely to make buyers and sellers think twice about moving. He says: “We’ve already seen many would-be sellers put any decision to sell on hold and now that a Brexit is confirmed we’ll likely see that indecision continue over the coming weeks. Both buyers and sellers will be waiting to see the effects and with the summer holidays now upon us, we can largely expect to have to wait until the new Prime Minister is appointed in October until we start to see any activity return."
House prices should "still trend upwards"
Mark Weedon, head of research at Property Partner says: “In the short run, housing transactions in the mainstream market are likely to remain low, but the 'stickiness' of residential property may prevent house prices from actually falling, with the probable exception of London’s most expensive areas.
“Unlike other asset classes, far fewer people are willing to sell residential property in uncertain times, which in turn further reduces supply and eventually provides upwards pressure on prices.
“Through the oil shocks of the Seventies, the recessions of the early Eighties and Nineties, the bursting Dotcom bubble and the Global Financial Crisis, residential property outperformed all other asset classes – in addition to the attractive income stream it provides.
“In fact, between 1973 and today, the UK residential market has seen no five-year period with negative total returns, after accounting for both rental income and capital gains.
“Looking further ahead, the fundamentals of the mainstream UK housing market should reassert themselves. With demand still far outstripping supply, house prices should trend upwards, albeit perhaps at a slower pace.
“And massive infrastructure projects like Crossrail, HS2 and the government’s plans for the Northern Powerhouse will go ahead irrespective of the Leave vote, improving connectivity and transforming neighbourhoods."
Demand from overseas investors
Charles Curran, principal at Maskells Estate Agents, believes a weaker sterling could lead to more interest from overseas investors. He says: “The market has been filled with uncertainty over the past couple of years and now that we have voted to leave, this draws a line under a major obstacle in getting the prime London market back on its feet.
“There is no doubt that the slowdown in the market prior to the referendum was as a result of the Chancellor’s ill-conceived increase in Stamp Duty (SDLT), and as such we do not expect to see an increase in prices. We expect the domestic buyers to remain subdued, perhaps opting for rental accommodation, but we do expect more interest and volumes from overseas buyers.
“An unwanted consequence of leaving the EU is that our currency will depreciate, making property cheaper in net terms compensating for the high SDLT in prime London. Why would they want to buy here? For the same reasons they always have – London is the greatest city in the world to live in – and we are not biased!”
Russell Quirk, chief executive of hybrid estate agent eMoov.co.uk, is more upbeat about the impact of the EU referendum on the housing market, though he believes that property prices in central London could suffer.
“I don’t anticipate any tangible difference where the UK property market is concerned and the supply and demand balance that is currently dangerously out of kilter will see little sign of stabilising itself.
“Going forward the UK market will go from strength to strength, perhaps with wobbly knees, at it emerges from the clutches of the EU, but it will soon find its feet again,” he says.
“There may be many buy-to-let landlords and second homeowners rushing to list their property for sale in order to maximise their profit, before the ‘Armageddon’ on the horizon destabilises the pound. Ironically, it will be these people flooding the market with additional stock that may see prices cool ever so slightly. However, property values increased by 6% over the course of 2015 and we predict the same rate of growth by the end of 2016.
“This could, however, be the final nail in the coffin for the prime central London market, as the capital’s high-end properties have never been less desirable in the eyes of foreign investors. With demand having slumped to record lows over the last year, it’s not looking good for the capital’s property elite.”
Richard Donnell, insight director at property market analyst Hometrack, agrees that it is central London that will feel the negative impact of Brexit most keenly.
“History shows that external shocks can reduce sales volumes by as much as 20%, with sales volumes already down over the last year. 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 the sterling is unlikely to attract overseas buyers in the near term,” he says.
“Across London, where house price growth is running at 13%, 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."