Ahead of the vote, the Treasury voiced dire warnings of prices plunging by up to 18 per cent while price indices from lenders Halifax and Nationwide registered slowdowns in the rate that house prices are growing. For example, the Halifax index for April reveals the smallest quarterly and annual increase for five months. The lender’s figures show prices in the three months to April increasing by 1.5 per cent and 9.2 per cent year-on-year.
The immediate impact of the vote is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a ‘wait and see’ approach to the short term impact on financial markets and the economy at large.
The impact will be primarily based on job security. This could lead to fewer buyers, which will bear down on demand and prices. Homeowners will be reluctant to sell as it might be harder to trade up if the value of their property has fallen which has the potential to freeze the market. For those in the rental market, lack of supply could also push up rents.
A continuation of current uncertainty is likely to pull back price growth and transactions in the short term, certainly until the end of the year. However, investment is for the long term and short term fluctuations should not impact on long term investments decisions.
The market had already slowed in the months preceding the vote, after three years of rapid London-driven growth, as homebuyers and sellers awaited the outcome. Prime markets such as Central London will feel the greatest short-term impact but prices may be supported by the fall in sterling, which will attract more foreign investors.
The housing shortage will continue to bolster demand. In the short to medium term, the fundamental demand and supply dynamics are unlikely to change with a continued undersupply of homes across the country underpinning pricing in some of the most desirable areas.
The market will certainly need fresh stimulus and the new Prime Minister will face growing calls to reverse the stamp duty raises. The collapse in the share prices of the UK’s biggest housebuilders points to a freeze in new building and a further impact may be a skills shortage due to a lack of migrants in the building sector resulting in further shortage
With interest rates more likely to fall than rise, it makes forecasts of falling house prices look unlikely, certainly outside central London. However, a distinct danger is while the base rate could be cut further, lenders may actually start raising their mortgage rates as a technique to control their lending levels.
The reality is that this is all speculation and it will take a long time to see full economic effects of Brexit and it’s undoubtedly far too early to predict the full impact.