While the number of properties with a reduced asking price has increased from 29.3% to 34.5%, mortgage availability remains broadly unchanged, according to the analysis report from global investment banking firm.
The early conclusion from the industry note from the firm’s UK Building and Residential Services team of analysts is that UK households have the confidence to try and move house and accept that prices may need to soften to make it happen since the decision to leave the EU while there is no sign of a property recession.
The research says that listings volumes, for example, do not suggest a slowdown and an analysis of residential property listings on major UK property portals and have found that since the EU referendum the number of listings has increased by 3.6%.
It also points out that in the two previous UK recessions housing transactions were, with hindsight, a lead indicator, falling for more than 18 months ahead of the recession. In the absence of current transaction data we view listings activity as an early look towards housing transactions. With listings increasing, it appears UK households are prepared and ready to move.
Before the vote there were headlines suggesting that Brexit would result in a steep fall in house prices but according to the analysis the trend in asking prices is only just downwards. On average asking prices have reduced by 0.2% since the EU referendum, somewhat less than the movement in the prices of the shares of the companies which service the UK housing market.
‘Perhaps more interesting is the movement in the number of properties which have reduced their asking prices. Before the EU referendum 29.3% of listings had reduced their initial asking price, this figure has now increased to 34.5%, overall a move of 520bp or 18%. This suggests to us that UK households remain keen to move and are adjusting their price expectations,’ the report explains.
In the two previous recessions London house prices were the first to fall and the first to rise but the research show that so far 76% of London postcodes have seen an increase of listings, 22% a reduction and 1% unchanged. With respect to asking prices 70% of London postcodes have seen a reduction in asking prices and 30% an increase.
A breakdown of the figures show that in East London 35% of postcodes have seen asking prices rise and 65% fall, in the North of the city 30% have risen and 70% fallen, in South London the split is 27% up and 73% down and in West London 25% up and 75% down.
‘London has the largest rental market in the UK and we believe that asking rents provide the most cutting edge data point with respect to the health of the underlying housing market. Since the EU referendum 51% of London postcodes have seen an increase in asking rents, 48% a reduction and 1% remain unchanged,’ the report points out.
The firm’s UK residential asking price index has changed little since the beginning of July, down by just 0.225%. The national picture did however hide a mixed regional picture, the biggest faller being the East Midlands down 2.24% and the biggest gainer, Northern Ireland up 3.66%. London was down 0.81%, Central London down 1.03% and the South East down 0.66%.
It suggests that there is no housing recession yet. ‘The review of our post EU referendum high touch housing market data does not currently point to a UK housing market on the cusp of a recession. The current situation of rising listings and softening prices suggests that the UK housing market is functioning, albeit at levels below long run levels. If prices fell too much in the eye of the home owner we expect listings would be withdrawn,’ the report says.
‘Mortgage availability, in our view, remains high with eight first time Buyer 100% LTV mortgage products available at an overall cost of 2.9%. The number of mortgage products available has reduced slightly since the EU referendum. Six of the best buys have seen mortgage rates decrease, six have increased and five remain unchanged,’ it adds.
The analysis also looks at whether or not share prices in the real estate sector are affected. It says that share prices in the UK estate agency sector are currently around 30% lower than their pre-EU referendum levels with house builders 20% to 25% lower and property portals about 2% lower.
‘In our view the portals share prices reflect the data they are displaying, the UK housing market is open for business and agents have not reduced their marketing budgets. However some estate agency branches may close,’ it warns.
‘Turning to the UK house builders, the commentary from the companies themselves is business as usual at the front end (sales), but with an eye of caution, just in case, at the back end (land purchases). Our high touch data suggests that they are perhaps priming the autumn selling season pump a few weeks earlier than normal to reduce the risk of a market lull, this seems sensible to us,’ the report adds.
‘We remain bullish on the UK house builders. We have seen large downgrades across the estate agents, which, in our view, is not backed up by our high touch data, if this situation remains unchanged the agents, in our view, offer very attractive entry points,’ it concludes.
