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Warnings of uncertainty in UK housing market, but falling pound could spark ‘Brexit bubble’ at top end of London market


A short-term fall in house prices and sales could follow the UK’s decision to leave the EU, according to property experts, although sterling’s slump could lead to a “Brexit bubble” in the most expensive pockets of the market.

In the run-up to the referendum there were signs of a slowdown, with the Royal Institution of Chartered Surveyors (Rics) saying uncertainty over the outcome had driven the biggest fall in the number of people trying to buy a property since the financial crisis.

The Treasury had forecast a fall in house prices of up to 18%, while the National Association of Estate Agents (NAEA) predicted that Brexit would cut levels of immigration and depress future price rises, leaving the average UK house worth £2,300 less in 2018. It predicted a £7,500 fall in London.

Richard Donnell, insight director at property consultancy Hometrack, said that as a result of the vote the near-term prospects for the UK housing market looked very uncertain.

“The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short-term impact on financial markets and the economy at large,” he said. Donnell said that in the past external shocks to the market had reduced sales volumes by as much as 20%.

He added: “The decision to leave the EU will be most keenly felt in the London housing market, which is fully valued and already facing headwinds. House price growth is already weak and running in low single digits in central London areas and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity,” he said.

Andrew Reeves, who runs his own estate agency in London, said the result removed some of the uncertainty from the market and buyers who needed to move would re-emerge and begin their searches. “Non-urgent buyers will be less enthusiastic, instead waiting to see if house prices ‘soften’ further, and this may well continue throughout the rest of 2016,” he said.

“Decisions by international banks and multinational companies in the City on whether to stay put or move out of the UK may have some influence on both property sales, and on rental demand from corporate tenants.”

David Brown, the head of agency Marsh & Parsons, said regardless of the referendum result there was still plenty of pent-up demand in the UK housing market “and a leave vote doesn’t change that overnight”.

He added: “When you think back to before the financial crisis and the volume of transactions we were witnessing on an annual basis, there’s clearly scope for further improvement. The decision to leave doesn’t alter the fact that plenty of people have to and still want to move.”

Before the referendum, the fall in buyers’ appetites for property was particularly acute in the most expensive parts of the market, where many of the purchases and sales are discretionary.

Earlier this week, agency Jackson-Stops & Staff said that a £1.4m property located in the Midlands had been photographed and was ready to market, but the seller was waiting for the results of the vote before acting. Builder Galliard has been offering a Brexit clause on homes in its Slough development, and was opening at 8am on Friday to take calls from buyers of any of its developments who have concerns.

But while the wider market may slow down, agents in the most expensive parts of London suggest that overseas buyers could rush in as sterling falls and reduces the cost to them of UK property.

Peter Wetherell, who runs an estate agency in Mayfair, said the decision to leave could lead to a “Brexit bubble” in some parts of the London property market.

“This morning already sterling has plummeted to a low not seen since 1985 and this will now create a short-term buying opportunity for US dollar and euro-based property investors,” he said.

“This is a market for risk-takers and people able to spot high-risk but potentially lucrative opportunities that have emerged overnight due to the fluxes in the markets. Dollar-based Middle East and Asian investors in particular will now wake up this morning and look at short-term buying opportunities in the central London property market.”

On Wednesday, James Evans, a director at Douglas & Gordon, which covers south and west central London, said a vote to leave would mean “an exciting buyers’ market”. He said: “If there was a fall in appetite it would be filled very quickly by people who are sitting on a lot of cash and not getting a return anywhere else. These would be domestic buyers with cash or foreign buyers who are also getting an extra bonus because of the currency.”


Author: Hillary Osborne for the Guardian

Photograph: Anthony Devlin

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