Despite negative Brexit rhetoric from Westminster and the industry, the property market in the UK remained resilient in October, according to a new analysis, but some outcomes could be damaging.
Although prices dipped slightly, down 1.4% on the month, sales increased by 2.4% month on month and by 9.7% year on year, according to the report from haart.
The figures also show that the estate agent’s network saw buyer registrations rise by 37%, although there are concerns that an unfavourable Brexit deal could impact on the property market in 2019.
‘Twenty nine months after committing to leave the European Union we finally have a Brexit deal on the table, however political infighting is at its highest level and a number of scenarios could play out which would affect the property market in different ways,’ said Paul Smith, haart chief executive officer.
‘Government data shows that while total transactions have risen by 53% since 2009, over the last four years, they have largely remained stable, sitting at around 1.1 million annually despite the referendum being called in 2016,’ he pointed out.
‘I believe that even if we encountered a hard Brexit, we would be very unlikely to see the significant price falls encountered during the credit crunch. Greater regulation in the banking and mortgage market, a shortage of supply and Government support which underpins the first time buyer market means that a far more likely outcome would be a reduction in transaction volumes,’ he explained.
‘While this uncertainty would result in fewer homes coming to market, demand will continue to outstrip supply as at the end of the day people will always need to move home for various reasons, which will ensure that prices continue to hold up regardless of the outcome,’ he added.
He believes that the greatest threat to the property market is a delay but there are a number of different scenarios that could play out. Firstly, leaving the EU with a good deal could boost the property market in 2019. Smith believes that buyers are holding off to see what happens with the deal.
‘With a strong deal in place, confidence would fuel the market upwards, turning instructions into transactions. We would expect an uplift in transactions of 10% to take place in the second half of 2019, with an increase in buyer demand leading to slight price rises thereafter,’ he said.
Secondly, leaving with no deal could likely result in a short term blow for the property market, at what would normally be a peak time of the year for activity. ‘The most likely impact would be a slower market, with fewer transactions taking place as both buyers and sellers hit the brakes on their plan,’ Smith explained.
‘However, I don’t foresee a large scale property market crash and instead anticipate that in this scenario house prices are unlikely to fall by more than 5% due to a shortage of homes on the market propping up overall prices,’ he said.
‘It is also extremely likely that in the event of the UK leaving the EU without a deal, there will be a fiscal stimulus in the form of a stamp duty holiday, and a drop in the Bank of England base rate to support borrowers,’ he added.
Another possible scenario is a challenge to Theresa May’s leadership and Smith explained that political stability is crucial for a thriving housing market and that means a stable Government.
‘If a leadership bid was triggered we would risk creating further uncertainty in the market. In this instance we’d undoubtedly see more home owners holding off listing their homes, resulting in a drop in transactions of roughly 2% and potentially house price dips. I would expect London to be hit the hardest,’ he said.
Yet another outcome is an extended Brexit negotiation period beyond March 2019 which Smith thinks could be as damaging as a no deal. ‘Our latest data shows that house prices across England and Wales have fallen by 0.8% on the year, highlighting the adverse effect uncertainty continues to have on the housing market,’ he pointed out.
‘Extending negotiations would only encourage further uncertainty, resulting in a delay among buyers and sellers. Should this continue throughout 2019, we could expect transaction volumes to dip by as much as 20%, further stunting any opportunity of economic prosperity at a time when we need it most,’ he added.
