Editor’s Note: Be careful what you wish for

The shockwaves of the Brexit vote are still being felt and political reshuffling and resignations are ongoing.

All eyes have been on the stockmarket as a barometer of sentiment, but the housing market will be another important, though lagging, indicator of public and investor confidence. In fact savvy buyers will be keeping an eye on the FTSE and particularly the share price of major housebuilders and lenders in order to gauge whether they should proceed with plans to buy property.

The online investment platform Rplan.co.uk reported a rush of investors selling their holdings in UK property funds and opting instead for global alternatives. A Singaporean bank also halted lending on London property in a further sign of the cloud of uncertainty hanging over UK property.

While a drop in house prices might be welcomed by those who feel property values are overinflated, it may not actually help priced-out first-time buyers. In an article for the CML, former minister David Willetts, who is now executive chair of the Resolution Foundation, points out “it is unlikely that a house price fall would happen in isolation. If incomes were to follow suit, affordability would remain as much of a pipe dream as it is today”.

Worryingly, as the Foundation’s research confirms, borrowers who have got onto the housing ladder in recent years are heavily indebted as a result of steady house price growth and the resurgence of high LTV deals.

Willetts continues: “A house price fall would also have effects on those who have managed to get on the housing ladder in recent years…  a rapid house price fall – rather than the gradual correction most would like to see, whereby incomes catch up with static or gently deflating prices – would leave these households highly exposed, if not yet in negative equity territory.”

The big question that experts ponder in our cover feature ‘Brexit fears rock new-build sector’ is whether the Government will be forced to extend its Help to Buy schemes in order to prop up an increasingly shaky housing market.

What seems pretty clear though is that mortgage rates have further to fall and, for buyers who believe in the fundamentals of the UK property market in the longer term, locking into a five or 10-year fix is likely to get even cheaper. But for many buyers, this is unlikely to tempt them into the largest purchase of their lives given the fear of price falls in the aftermath of the referendum.