By Legal Futures’ Associate The Cashroom
Since the referendum of 2016, the property market has been concerned about the impact of Brexit. Whilst property prices have continued to grow in most areas of the UK, prices have been slowing, buyers and sellers are reluctant to make a move and a Brexit storm has cast a murky outlook on the UK property market in 2019.
The Office for National Statistics’ most recent UK House Price Index found that annually, prices have increased by 1.4% in March. However, this also demonstrates a slowdown in the market as this figure of annual growth has fallen from 4% in March 2018.
The figures also expose a general slowdown in house price growth since the referendum result in 2016 when house prices were increasing by 8.2%.
The headline figure in most housing reports and indices concerns the inactivity of buyers and sellers entering the market. In February, the RICS UK residential survey found that respondents recorded a 40% reduction in new buyer enquiries. Although the net balance figures for March, April and May were slightly more buoyant with only a -26% net balance of new buyer enquiries, it is clear that buyers are reluctant to declare an interest in property until a definitive Brexit outcome is made.
This has also spread to new instructions and property entering the market, creating a reduced housing stock of available property. In May, the sentiment among respondents was slightly more upbeat with a net balance of -27% but continued a trend of reducing stock in 2019. In April, new instructions and property entering the market had a net balance of -35% which indicated the poorest reading since 2016 and down from -30% in the previous month.
Similar sentiment was found in recent NAEA Propertymark’s Housing Reports. The number of properties available per branch fell from 37 in March to just 35 in April. However, April’s figure was an increase on the 33 recorded in April 2018.
The number of registered house hunters per branch fell by 10% from 296 in March to 265 in April; it also marks a reduction of over a fifth (21%) in the past year when there were 337 registered house buyers per branch.
Year on year, the average of 237 house hunters per branch was the lowest recorded number since the financial crisis of 2008. Whilst the impact has not been quite as devastating to the sector, the Brexit anxiety is obviously deterring many potential buyers.
The reduction in residential supply and demand has been eclipsed by the complete unknown of the demand for commercial property. Construction output in May faced its most severe decline since the unseasonably poor weather experienced in March 2018 according to the seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index.
Although experts predicted that May’s figures would remain stable at 50.5, the actual index rating slipped considerably below the 50 (no change in construction output) point to 48.6.
In particular, worried by a lack of political certainty and Brexit outlook, many companies have delayed commercial building opportunities. Commercial property construction fell to its lowest output since 2017 and the overall construction employment levels plummeted to their lowest levels in over 6 years.
Are there any signs of potential improvements?
Even in April’s NAEA Housing Report, it was clear that transactions are picking up in the property market. The number of approved sales increased for the first time in 2019, rising by 7% from an average of seven per branch in March, to eight in April.
According to recent research by Reallymoving.com, who analysed the agreed sales from April and May, house prices could be set to bounce out of the Brexit blip and even increase beyond the heights of summer 2018.
The data found that UK house prices are set to soar by 9% between May and August, with the North East of England set to increase by 20.2%.
The Financial Conduct Authority’s ‘Mortgage lending statistics – June 2019’ data also reveals that mortgage lending in 2019 is healthier than in previous years.
The value of gross mortgage advances was 1.4% higher in the opening quarter of 2019 when compared with the same time a year ago. The value of mortgage commitments (lending which has been agreed to be advanced in the coming months) was £63.8 billion, 4.5% higher than a year ago. If this lending approval evolves into a house purchase, it would suggest that the market is on course to improve.
Whilst the property market has been rocked by Brexit, there are signs that buyers and sellers are returning with improvements expected by the summer of 2019.
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