Brexit uncertainty hits home sales, says RICS

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Uncertainty following the Brexit vote has resulted in a significant drop in sales and in new buyer enquiries, the latest survey by the Royal Institution of Chartered Surveyors has shown.

June’s index reveals a marked drop in activity in the housing market.

New buyer enquiries declined significantly across the UK in June, with 36 per cent more chartered surveyors nationally reporting a fall in interest – this is the lowest reading since mid-2008.

The South has been the hardest hit, with anecdotal evidence suggesting both the EU result and the tax changes, which took effect at the beginning of April, as having an impact on sentiment.

There was a further fall in the supply of properties coming available for sale across the UK in June, with the exception of Northern Ireland.

This highlights the continuing lack of stock as 45 per cent more chartered surveyors saw a fall in new instructions in June from a net balance of -31 per cent in May. This is the steepest fall on record and extends a trend that has been in place since 2014.

The market has also seen further decline in sales this month with a third successive monthly drop in activity.

Respondents expect this trend to continue with 26 per cent more respondents anticipating a further drop in sales across the UK over the next three months. This is the most negative reading for near term expectations since 1998.

There was a drop in house price growth as prices are rising at a more moderate pace. Sixteen per cent more respondents reported having seen prices rise rather than fall across the UK.

London remains the only region where respondents are seeing prices fall (-46 per cent net balance) with this largely being concentrated in the central zones.

But, near term price expectations are now in negative territory across the whole of the UK with 27 per cent more respondents expecting to see prices fall rather than rise over the next three months.

Looking further ahead over the next 12 months, sales expectations have turned negative for the first time in four years with 12 per cent more contributors expecting transactions to fall rather than rise.

Significantly, over the next 12 months the dip in prices is only expected to persist in London and East Anglia and longer term, prices are still expected to rise, albeit a little less than previously anticipated, with a cumulative increase of 14 per cent projected for the next five years.

Rent expectations over the same time horizon remain more resilient and are still broadly consistent with an increase of just over 20 per cent, says RICS.

Chief economist Simon Rubinsohn says: “Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity.

“However, even without the build up to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year, following the rush in many parts of the country from buy to let investors to secure purchases ahead of the tax changes.

“Our data does suggest that the dip in activity will persist over the coming months but the critical influence looking further ahead is how the economy performs in the wake of the uncertainty triggered by the vote to leave.”

He adds: “Respondents to the survey are understandably cautious but with interest rates heading lower and sterling significantly so, it remains to be seen whether the concerns about a possible stalling in both corporate investment and recruitment are justified.”

However, Legal & General Housing Partnerships director Stephen Smith says: “The sentiment index released by RICS today discussing the outlook for the housing market post a vote for Brexit feels a somewhat pessimistic viewpoint.

“Since the referendum the market has not experienced issues that would normally indicate a downturn; crucially we are not seeing an upturn in forced sales.

“The main circumstances that determine house prices; insufficient supply and a continued demand for home ownership have not changed since the vote to leave.”