Prolonged Brexit uncertainty weighting heavily on UK housing market
Prolonged Brexit uncertainty will likely further damage the UK housing market with the latest residential market survey finding that it is holding back sales.
Some 77% of respondents to the February survey from the Royal Institution of Chartered Surveyors (RICS) believe that transactions are being affected by although 12 month expectations are more upbeat.
However, the survey was conducted before the recent votes in the Houses of Parliament and the prospect of Brexit being delayed to May or even June is now much more possible so the uncertainty looks set to go beyond these views.
Overall, the survey shows a continued decline in activity across the UK housing market, with new buyer enquiries, agreed sales and instructions all falling. This is the sixth consecutive month all three have fallen together. The headline price balance also slipped to its lowest reading since 2011.
The RICS survey has long highlighted the impact Brexit uncertainty has had on the housing market, as stock levels hit all times lows, activity stalled, and sales took longer to complete.
Looking at the key activity measures in detail, buyer demand fell for the seventh consecutive month in February as 41% more respondents reported a fall in the number of new buyer enquiries, and the volume of agreed sales also slipped, with the indicator now having displayed a flat or negative trend since March 2016.
This near term uncertainty is set to linger for the coming three months, with sentiment for sales remaining subdued. And while it says that looking further the 12 month sales expectation suggests a slightly more positive outlook, this is probably now outdated due to events in recent days.
As the lack of stock, in addition to Brexit, appears to be holding back buyer demand, 29% of contributors reported a decline in new instructions being listed over the month. This is the eighth consecutive month where respondents have reported a fall in the number of new properties being listed for sale. Average stock levels are now back to record lows, and respondents cited this as the next biggest challenge after Brexit.
‘Although activity in the housing market continues to be weighed down by the lack of available stock, changes in the tax regime affecting property, and affordability; feedback to the latest RICS survey makes it pretty clear that the ongoing uncertainty around how Brexit will play out is the critical factor influencing both buyers and sellers,’ said Simon Rubinsohn, RICS chief economist.
‘And with little sign that the issue will be resolved anytime soon, it could prove to be a challenging spring for the housing market and the wider economy. It is clear from professionals working in the market that this environment requires a greater degree of realism from those looking to move. A reluctance from some vendors to acknowledge the shift in the balance of power in the market will compound the difficulty in executing transactions,’ he added.
According to Hew Edgar, RICS interim head of policy, it is clear from recent month’s survey results that the current state of British politics that has arisen from Brexit, particularly in the last six months, continues to take a toll on UK housing. ‘Taking Brexit out the equation, there are clear issues that need to be tackled such as supply; a disputable SDLT framework and a faltering PRS system. All of which have been overshadowed, and have therefore not received the much needed parliamentary discussion and debate,’ he pointed out.
‘UK Parliamentarians must recognise that the prolonged uncertainty without effort to address separate key issues in the UK, is damaging confidence in the housing sector, and we share the resounding sentiment of frustration from our professionals,’ he added.