Mortgages  

Property prospects post-Brexit

Property prospects post-Brexit

Following the referendum, buyers and sellers paused to see whether job security and/or access to competitively priced mortgages were likely to change. There is no doubt most are taking longer to commit and negotiating harder so some property prices have softened.

About four out of five of sellers are also buyers. Most customers tell my north London agency that the difference between the sale and purchase price is more important to them than the amount paid or received.

The short-term effects of the Brexit vote were probably over-estimated, but the long-term impact may have been underestimated. The Bank of England showed its determination to reduce the risk of recession by cutting already rock-bottom interest rates, although the fall in sterling and almost certain rise in inflation means a further reduction is unlikely before the new year.

In addition, lenders’ capital requirements were relaxed to allow an extra £150bn of borrowing, whereas there was £170bn of money printing/quantitative easing, and a £100bn scheme to force banks to pass on lower interest rates to households and businesses was introduced.

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The Bank predicted that UK GDP would grow almost twice as fast in 2017 as previously predicted after the UK defied expectations of a downturn following the referendum.

Positive property data has prompted an upturn in fortunes for the housing market. The Office for National Statistics reported in October that average house prices continued to rise. Halifax said prices recorded their biggest increase since last March, but annual growth and transaction volumes slowed.

On the other hand, the Royal Institution of Chartered Surveyors said the market is “settling” with buyer inquiries up for two consecutive months after falling immediately after the referendum, partly because stock remained at record lows.

Confidence returning

Online property portal Rightmove indicated underlying confidence was returning with prices reducing, but not by as much as might have been expected at this time of year. Transaction times are holding steady with a sellers' market emerging in the north of the UK and buyers on top in the south.

There are conflicting signals from lenders. The Council of Mortgage Lenders says mortgages are now much more affordable than they have been for a long time. In September, homebuyers spent 17.7 per cent of their average incomes on average on mortgage repayments compared with 23.7 per cent eight years ago.

Although there was a fall in overall house purchase lending in September compared with the previous month, the volume of loans and amount borrowed was at its highest for a September since 2007. Conversely, the British Bankers’ Association said mortgage approvals arranged via high-street lenders recovered only modestly in September after a 19-month low, but remain 15 per cent down on a year ago.

The fall in the value of sterling since the referendum has made building materials from abroad more expensive, which has been partly offset by more sales to foreign investors, although some are waiting to see if values and/or sterling fall further.

Overseas occupiers and investors have in the past been blamed for inflating property prices. However, off-plan or bulk sales to these buyers underpin nearly every development – especially in London – so directly or indirectly help those seeking affordable homes to rent or buy.