What impact is Brexit having on UK property supply?

Successive governments have tried and, so far, failed to stimulate house building, despite government-run schemes such as Help to Buy which includes the Shared Ownership scheme and the Help to Buy Isa.

The government pledged back in October to provide an additional £2bn in funding for affordable housing, which indicates housing supply remains on the agenda.

But could the UK’s departure from the EU bring further downward pressure on the supply of properties in the UK market?

After all, there has been much talk of curtailing immigration, while jobs in the financial services industry, much of which is based in London, look to be under threat as firms move their headquarters elsewhere in Europe.

Will these potential consequences of Brexit have some kind of impact on the property market?

Signs of resilience

Alex Gosling, chief executive at online estate agents HouseSimple.com, believes the housing market is proving “extremely resilient to Brexit hyperbole”.

“Although in the weeks after Article 50 was triggered in March, there was a noticeable drop-off in activity both from sellers and buyers, we haven't seen property prices plummet as remainer George Osborne warned would happen,” he says.

“There is still an issue with property supply, and the lack of new properties coming onto the market, but this was a problem long before the Brexit vote.”

London and the south east markets, which have historically seen the strongest growth rates, particularly over the past five to six years, have been sluggish over recent months.David Torpey

He notes: “Our research found that new property listings fell 13 per cent in August.

“But the summer is generally a quieter time for property transactions and sellers marketing their properties, so it's hard to know what impact Brexit is having on supply.”

More recent research from HouseSimple.com, tracking supply in September, reveals a fairly buoyant outlook than the August figures had led many to fear.

Figure 1: Number of house hunters registered per branch from August 2016-2017

Source: NAEA Propertymark

New property listings were up by 20.2 per cent in September compared to August, according to the latest Property Supply Index compiled by HouseSimple.com. 

It shows that new property supply in London rose 44.4 per cent in September versus August.

Mr Gosling had warned that if property supply didn't pick up then the lack of new properties being listed will likely be pinned on the Brexit effect.

No positives

For David Torpey, managing director and chief operating officer at Bluestone Mortgages, the uncertainty created by the ongoing negotiations over what shape Brexit will take is not positive for any market.

He reasons: “In 2017 we have seen economic growth and house prices falling to around half the levels we saw in 2016 (from 5-6 per cent to 2-3 per cent). 

“This contrasts with markets outside of the UK, with the global economy performing better than at any time since the financial crisis in 2007. Although unemployment is at a 40-year low and interest rates are also at an historic low, these positive factors are offset by the uncertainty that has been caused by leaving the EU.”

More specifically, he points out: “London and the south east markets, which have historically seen the strongest growth rates, particularly over the past five to six years, have been sluggish over recent months. 

“Latest figures now show that London has the lowest rate of house price growth across the UK, with asking prices lowering. 

“London and the south east also have the largest downside risk to a negative Brexit outcome, due to their heavy reliance on financial services, a large immigrant population and high levels of consumer debt.”

But beyond the capital and its surrounding areas, house prices continue to climb.

Regional growth

Certainly, people do still need to buy and sell property but perhaps they are trying to do these transactions before the UK is officially out of the EU.

It is looking increasingly likely the UK will face another general election even before then.

A political intelligence report published by consultancy The Guide following the Conservative party conference in October puts a 75 per chance on Theresa May leaving office before the end of this year and a 90 per cent chance she will leave office by November 2018.

“As it stands, Britain’s vote to leave the European Union has done little to deter hopeful buyers from moving onto or up the housing ladder,” observes Jeremy Duncombe, director at Legal & General Mortgage Club.

“The housing market remains robust – house prices are now, in many cases, rising in line with inflation and in the regions are growing faster than traditional areas of strong growth such as London and the south east.”

It’s vital policymakers don’t underestimate the drastic shortage of housing stock in the UK.Anthony Rushworth

He puts this down to “a wider correction in the market as prices play catch-up with the capital and its surrounding southern counties”, but property also continues to benefit from the impact of infrastructure projects, such as Crossrail and HS2. 

Chronic lack of housing

For some, Brexit is a distraction from the real issue at hand, which is that there has been a dearth of housing in Britain for a long time.

Anthony Rushworth, founder of housebuilding investment platform Homegrown, urges: “It’s vital policymakers don’t underestimate the drastic shortage of housing stock in the UK and continue to throw everything at the problem, and get Britain building.

“I would hate for these short-term reverberations in the housing market, caused by Brexit, to serve as a distraction from the real problem at hand, and that is a lack of homes that will continue to place a squeeze on consumer spending and household disposable income well into a post-Brexit Britain.”

James Allen, head of Walker Crips Alternative Investments, observes there has been a move away from ‘executive housing’ projects to higher density projects in the south east. 

He believes this is symptomatic of the market for higher value properties softening and “may indicate that certain sites are being held back from development until a less uncertain political climate emerges”.

But he also points to an interesting development in April this year, when Tony Pidgley, who set up housebuilders Berkeley Group and is now the chairman, cashed in his shares for £31.10 each.

Mr Allen suggests the property ‘guru’ may have called the top of the market.

He says: “With Berkeley Homes’ sales strategy geared towards selling UK property to Far Eastern investors, Mr Pidgely’s disposal may have been compounded by concern that demand from these investors is beginning to weaken.”

eleanor.duncan@ft.com