'Calm before the storm'

Published: 30/06/2016 By Stephanie Wright

There has been good news for the property market throughout the year with strong growth for UK house prices, the growth was particularly strong in June regardless of the looming EU referendum. It has been reported that house prices have been increasing month on month, furthermore Nationwide’s index shows an annual growth rate of 5.1% in June alone, this is up compared to May’s growth rate of 4.7%. These increases have been a result of low mortgage rates and higher buying demand.

The looming EU referendum vote didn’t appear to have a negative impact on the time it took to sell properties, research reveals that the average time to sell a property is at the lowest level since 2010. The average number of days to sell a property in June was 57 days, making it lower than the previous month. However compared to last year this has decreased massively as the average was 65 days. 


What does it mean for the housing market following the UK’s decision to leave the EU?

Howard Archer, Chief economist at HIS Global Insights reported that the “Housing market activity and prices now look to be at a very serious risk of a market downturn following the UK’s vote to leave.” This in turn will affect the overall economic activity as well as consumer confidence in the market. There appears to be uncertainty amongst those contemplating putting properties up for sale. Since Brexit, the numbers of new sellers coming on to the market is 5.3% lower than the monthly average of this time last year. Many fear that there will be a decrease in the number of property sales across the capital for the rest of the year. There are predictions that house prices could be 5% lower in the next six months due to the vote and another 5-7% lower in 2017.  

It is uncertain as to how much things will slow down but this uncertainty will inevitably lead to more investors sitting back before making any decisions. This could result in fewer transactions being made and it has been argued that London could be hit the most. Charlie Campbell, analyst at Liberum Capital believes, “London might be more resilient than we all first thought”. Oversea landlords play a massive role on the capital than anywhere else and it is very difficult to predict what this could mean to the London property market in the months to come.

Our Managing Director, Patrick Henry Howell had this to say, “Of all the challenges that the London property market has faced over the past eight years, no hurdle has been more challenging than uncertainty. We have sailed through a credit crunch and soared by whilst wars were emerging, skipping on as other European countries have asked for financial help. All of these seemingly – albeit apparently not - devastating factors took a swipe at our stock market and job sector, casting an economic shadow over the U.K. Meanwhile the London property market marched on, slowed down only by potential changes rather than actual structural issues.

This is again the position that we find ourselves in. As a nation we are uncertain what will happen over the next few weeks, months and years and so instead of pushing on with our plans to buy or sell, we hold off. If history repeats itself this will lead to a humble rally as the murky political waters subside, as was the case during and after the past two general elections and most noticeably the stamp duty reforms.

I am sure that there will be speculative cries of an impending, economic downturn which will wipe a substantial percentage off of the U.K’s house prices, however I believe that as long as London remains an economic hub, properties are not being built fast enough and as the population grows the London property market will remain as one of the most profitable and consistent purchasing options worldwide.”