Brexit having 'negligible effect' on housing market

House price growth remained resilient in July although key indicators covering, agreed sales and new instructions all remained negative in the South West, according to the latest RICS UK Residential Market Survey.

The UK house price growth indicator posted the softest survey reading in three years in July.  Just 5% more respondents nationally saw a rise rather than fall in prices, a downward trend that is evident across the UK. Prices in the South West remain strong against any suggested uncertainty with 26% more contributors reporting a rise in prices as opposed to a fall. Near term price expectations across the region were broadly neutral in July (following two negative readings) with only 3% more respondents predicting decline in house prices over the next three months.

Interest from new buyers in the region bounced back from May’s record low reading (net balance of -45%) with 15% more contributors reporting a rise in new buyer enquiries.

Lack of stock in the housing market continues to be the main barrier of growth in the region, with new instructions falling again in the month of July. Indeed, 31% more respondents to the survey have seen a fall in new instructions and supply is at its lowest since February 2015.  In line with the dip in demand and the worsening supply position, sales declined for the third consecutive month. Across the South West, 16% more respondents reported a fall in transactions.

This reflects a continuation of a trend that started back in April following the implementation of the tax surcharge on investment purchases. Anecdotal reports provided by contributors to the survey suggest tax changes, are contributing to the current mood in the market but uncertainty from the  EU referendum is starting to settle as the market is beginning to move again in the region (although this is not necessarily the case elsewhere in the UK).

Significantly looking a little further out, key RICS indicators are up in July from June and show both sales and price expectations at the twelve month time horizon returning to positive territory, albeit relatively modestly so and well down on the numbers recorded through 2015 and the early part of this year.

Christopher Bailey MRICS, of Knight Frank in Exeter comments: “Any perceived post Brexit fallout continues to have a negligible effect on the market and buyers continue to want to get on with their lives. With current national and global uncertainties, property continues to be seen a safe haven to invest in.”

Simon Rubinsohn, RICS Chief Economist, commented: “The housing market is currently balancing a raft of somewhat mixed economic news alongside the latest policy measures announced by the Bank of England, which have already begun to lower cost of mortgage finance. Against this backdrop, it is not altogether surprising that near term activity measures remain relatively flat. However the rebound in the key twelve month indicators in the July survey suggest that confidence remains more resilient than might have been anticipated.

“Critically, it is hard to escape the stark message regarding supply that is evident in the latest set of results with RICS data showing inventories on agents books around historic lows on average. This is a long running story that may have been exacerbated by recent events but clearly needs urgent action from the new government.”