As the dust begins to settle on June’s result (albeit with the lack of certainty no activation of Article 50 brings), a cursory look at the morning papers could leave you with the impression that the housing market is in the latter stages of an apocalypse.
So, to paraphrase a famous hobbit: ‘is there any hope’?
Well yes, the picture in September looks nothing like as bleak as it did on June 24 th . From East Yorkshire bucking the trend to an apparent stabilisation of transaction levels in July, there are a few reasons to be cheerful despite all the gloom. We run through the weird (yes East Yorkshire) and the almost wonderful stories to bring some much-needed hope to proceedings.
Transaction levels virtually unchanged from June to July
First up, the number of transactions for value over £40,000 across the UK rose very slightly from 103,450 in June to 104,200 in July, according to HMRC. While the figure represents a sharp decline from the 5.1% increase seen in the same period last year, this must be taken in context with the potential fallout from the changes to SDLT earlier in the year. It’s entirely possible that due to ‘front loading’ (i.e. the glut of home buyers looking to beat the deadline in April) we may see slower than anticipated growth until the last quarter of this year.
Furthering this point, this relative stagnation (as opposed to sharp decline) is reflected in HMRC’s seasonally adjusted figures which show a drop in transactions of just 0.9%. Leading more bullish commentators to attribute the stagnation to the market quickly stabilizing after the short-term shock of a Brexit vote.
While ‘stagnation’ is not growth, and hardly breeds the same positive headlines, it also isn’t the ‘terminal decline’ or the catalyst for a 2008 level crash predicted in some quarters.
A coming reduction in house prices
According to Estate Agent Countrywide, the vote to leave the European Union could be a catalyst for a nationwide reduction of 1% of house prices. The firm’s economists are also predicting a drop of 6% in London alone by the end of the year.
The rationale behind this is the expectation of a severely weakened economy over the coming months, and the crisis in consumer confidence and household incomes this usually brings. Alongside slower than expected house price growth, particularly in London’s prime markets and the dent in expectations of future capital gain that follows it.
So where is the positive in all that? Well, firstly the potential boon of foreign investment. A weakened sterling and a reduction in property prices represent an attractive ‘discount’ for foreign investors. While this won’t solve the nation’s affordable housing crisis it should at least keep the wolf from conveyancer’s doors.
Furthermore, there is hope for UK nationals, basement-level interest rates and a reduction in grossly inflated house prices, may coax some life into the first time buyers’ market. This does, of course, rely on the caveat that household incomes remain relatively stable and the rental market continuing its ascent to the heavens. But, we promised you good news and good news you shall have.
The Yorkshire anomaly
The strangest of the bunch, and also the hardest to verify, according to some local firms in East Yorkshire, the area is bucking the Brexit blues. According to Goole and Pontefract based firm Heponstalls, the usually quiet month of August has seen an incredibly strong performance in the local market, with the firm being ‘inundated’ with instructions.
This comes in the wake of July’s Figures from the Residential Market Survey commissioned by the Royal Institute of Chartered Surveyors (RICS), which indicate a nationwide fall in sales and enquiries following June’s vote.
So what is behind East Yorkshire defying the odds? Is it simply a case of anecdotal evidence and bullish rhetoric masking the real picture, or perhaps the mini development boom the North East the was enjoying pre Brexit? The real reason may be far more complex and with far wider ramifications for the housing market as a whole.
Research conducted by Haart Estate Agents indicates that the effect of Brexit on house prices and sales is regional. In particular, those constituencies which voted out, appear to be performing more strongly than those who voted remain. Haart’s figures show that in leave constituencies the proportion of sales which fell through was 2% lower in the weeks following the result, while in London the figure rocketed by some 50%. A great example of this is Barnsley, which voted overwhelmingly to Leave (68%), but saw a 39% reduction in sales falling through after the Brexit result was revealed.
A look into listings since the referendum yields similar results, Doncaster, another area where the majority voted for Leave (69%), saw a 25% rise in the number of listings in the weeks since the referendum result. While Bristol, a city with a majority remain demographic (62%) has seen a 52% drop in registrations at Haart Branches and a 42% increase in abandoned sales.
This apparent bullishness in the country’s regions is symptomatic of the underlying reasons for Brexit (though that’s a debate for another forum), but should provide some succor to those conveyancers operating outside of the UK’s major metropolitan centers’, who, after all, are the most ‘at risk’ in a contracting housing market. As for those conveyancers operating in Britain’s major cities hope comes in the form of foreign investment, which as previously mentioned has real potential with the prospect of weakened sterling.
Overall, while things remain far from ideal (this was true before Brexit), the housing market is responding to adversity with some of that famous ‘British pluck’. Where the next 12 months will take it, is at this stage impossible to predict, but dare we say the green shoots of recovery are there?