MortgagesJun 24 2016

House prices predicted to suffer post-Brexit vote

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House prices predicted to suffer post-Brexit vote

Property experts have warned UK house prices could be hit by voters’ decision to leave the European Union.

Richard Donnell, insight director at Hometrack, said 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 attitude to assess the short-term impact on financial markets and the economy at large.

“The decision to leave the European Union will be most keenly felt in the London housing market which is fully valued and already facing headwinds.

The decision to leave the European Union will be most keenly felt in the London housing market which is fully valued and already facing headwinds. Richard Donnell

“History shows that external shocks can reduce sales volumes by as much as 20 per cent with sales volumes already down over the last year,” he said.

Mr Donnell pointed to already weak house price growth, running in low single digits in central London areas, adding “modest” price falls now appear likely.

He dismissed suggestions that a weaker sterling, which fell sharply this morning (24 June), would attract overseas buyers in the near term.

“Across London, where house price growth is running at 13 per cent, we expect the rate of growth to slow rapidly on greater uncertainty and market activity in the capital is set to remain disrupted until consumers and the financial markets can see a clear strategy to manage the process to a position where the outlook for the economy, jobs and mortgage rates becomes clearer,” he said.

Mark Posniak, managing director of Dragonfly Property Finance, echoed Mr Donnell’s view on price pressure for the property market, but said investors “should not write off” the market.

He said he would be waiting to see how the Bank of England, the government, the financial markets and economy react today (24 June) and in the weeks and months ahead.

Mr Posniak said: “Despite the magnitude of the result, the structural supply issue underpinning the UK’s property market may well prevent prices falling materially.

“Overseas demand may also increase on the back of the decimated pound. For many overseas investors, buying British property just got a lot cheaper.

“Short-term liquidity issues are possible, if not likely, among bank lenders and non-bank lenders that have bank funding lines.

“In the days and weeks ahead, banks and every other type of lender will be monitoring events forensically.

“With Leave winning the referendum, the appetite for risk will almost certainly reduce until we have a better understanding of what we’re facing.”