Now that the dust has settled after the referendum on 23 June, we can consider further how the Brexit vote is affecting the residential housing market and the potential impact over the next few months and years.
Impact On the Residential Housing Market
The housing market in the UK dislikes any element of uncertainty. If we review activity in the market in the run up to general elections and budget announcements the market tends to slow down in these periods as buyers are nervous about what a potential new government will mean or what decisions will be made in a budget which will affect them. This was evident again last year in the run up to the Scottish Referendum. This is not unusual and after any result or announcement the market picks itself up and moves on fairly swiftly as the decision is made and there is certainty again.
With the European Referendum it was difficult to tell whether there was a slow down because of the referendum or whether it was as a result of the SDLT changes in April. However, the impact after the result was different in that the result was unexpected for many and the result was further uncertainty. Questions were immediately raised as to who would be the next Prime Minister? Would there be another referendum? When would Article 50 be invoked? The country looked set to be thrown into months of further uncertainty. The result in the housing market was that some purchasers were choosing to withdraw from transactions or demanding price reductions, fearing a crash in the market.
However, with the new PM now being in place, an element of certainty has come back into the market. It is clear that there will not be another referendum, or a general election any time soon and we are told that Article 50 will be invoked next year which then gives a further 2 years to negotiate an exit from the EU. Interest rates have also been held at the same level, despite indications that they would be cut further.
Whilst there was a period of a few weeks where purchasers were reluctant to commit, it seems that they are now feeling more confident and whilst the commercial market is still less certain because of the withdrawal of some funding, the residential market has not suffered the same fate.
In terms of property prices, there is a risk that London prices may be affected if international demand for properties wains but there is less international demand outside of London and so there will be less of an effect on prices where demand from UK buyers remains high.
It is expected that there will be a quiet period for another month or so over the summer holidays but the indicators are that it will be business as usual come September. Property owners should remain confident as the housing market is a massive part of the British economy and their fates are intertwined. Therefore, it is in any governments best interest to do everything in its power to ensure as little damage as possible is done to the residential property market in order to keep this on track and as a result, keep the economy as a whole on track.