The potential impact of a ‘no deal’ Brexit on the UK property market was brought sharply into focus last month after Mark Carney’s comments made at a private meeting with ministers were leaked to the press.
A recent report from the Royal Institution of Chartered Surveyors (RICS) highlights just how much of an influence Carney’s remarks have had on consumers who were actively considering moving home last month, and on overall market expectations in the wake of further economic and political uncertainty.
Unlike other house price indices, which generally rely on empirical data, the RICS monthly report is sentiment based, meaning that its member surveyors from across the country provide their views on a series of questions relating to what they have observed over the previous month in their area.
Given that surveyors are a vital part of the property ecosystem – after all, if a property is purchased with any sort of mortgage, a surveyor’s valuation is required by the lender – RICS members are uniquely placed to provide insight into how the housing market is fairing from region to region.
Given the background then, this morning’s report makes for rather interesting reading.
At a headline level, RICS suggests that new buyers are holding back on their purchases, due to Brexit uncertainties, leading to their indication that the number of properties sold over the next twelve months is likely to dip from the volume of transactions we’ve seen this year.
However, fewer vendors listing their properties for sale in some regions has counter-balanced any drop off in buyer activity, meaning that prices in many areas remained flat last month, although there is significant variation across the UK, as has been the case for much of this year.
As well as the ‘Brexit effect’ creating a climate of uncertainty, surveyors also suggest that the headline slow-down in purchase activity in September was caused by a combination of affordability constraints, together with the lack of available homes for sale as the average stock on estate agents’ books up and down the country has dropped again to near record low levels.
This in addition to the recent increase by the Bank of England in interest rates, has meant that many would-be movers have now adopted a ‘wait and see’ attitude.
Simon Rubinsohn, RICS Chief Economist, commented” “There are a number of themes running through the comments of respondents this month, but uncertainty relating to Brexit negotiations is at the very top of the list followed by references to the confidential remarks made by the Bank of England Governor to the cabinet.
“All of this is, not surprisingly, taking its toll on the sales market with the key activity indicator in the survey flat or slightly negative in all parts of the country apart from Northern Ireland and Wales.”
But despite the report’s rather negative overtones, it’s perhaps not all doom and gloom. As Brian Murphy, Head of Lending for Mortgage Advice Bureau highlights, there is a continued disparity across the UK which has been at play for most of 2018, where consumer confidence in bricks and mortar would appear to still be prevalent in many areas.
He explained: “Whilst Mr Carney’s remarks last month were perhaps somewhat taken out of context – he was of course, asked to provide his views on a range of potential scenarios, not just ‘worst case’ – given the widespread coverage they received, RICS members appear to be suggesting that the impact in some areas of the country was noticeable.
“However, other regions, such as Northern Ireland and Wales, have seen a buoyant market continue in September in terms of volumes, with values increasing, albeit modestly of course, in the West Midlands and Scotland.
Brian continued: “Indeed, today’s report also suggests surveyor expectations are that, despite last month’s headlines, prices in most parts of the country will either remain at current levels or edge up slightly over the next year.”
So, what do those surveyors, who are actually at the coalface of the current market, think? It’s perhaps fair to say that there is a marked difference between regions in terms of sentiment.
For example, in the North West, John Halman of Gascoigne Halman in Wilmslow records September as being “still a reasonable market, although very low levels of general activity”. However, Adam Farnsworth of Berrys in Kettering is less optimistic, suggesting that in his locale within the East Midlands “uncertainty has crept in like a river fog in autumn”.
He continued: “Sales of houses under £250,000 sell well, with increases in values. The mid-market appears flat, and the higher market subdued.”
In the West Midlands it would appear to be a different picture again, as Colin Townsend of John Goodwin in Malvern observed: “Though there is evidence that the market might be about to slow over concerns with the economy, Brexit and against rumours that parts of the UK housing market are struggling, September was another strong month.”
But in the South East’s leafy commuter haven of Cobham, Anthony Webb of Trenchard Arlidge notes a very different environment, and suggested that “Brexit uncertainties compound excessive Stamp Duty and government interference in the property market”.
His sentiments are echoed in the South West by fellow surveyor Simon Barker of Knight Frank LLP in Sherborne, who warned: “Brexit continues to cause angst amongst buyers and sellers alike.
“I feel the next two months are pivotal in creating a positive market sentiment for 2019. A no-deal Brexit will be a disaster for the UK and the property market in my opinion.”
With further rounds of crunch Brexit negotiations next week, many consumers and industry professionals will be hopeful that the current status quo will improve once our way out of the EU is made clear – one way or the other.
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