News Of The Demise Of The Property Market Has Been Greatly Exaggerated
There's still a lot of uncertainty surrounding the EU Referendum result. Russell Quirk explores the aftermath of Brexit in the property market.
July 19, 2016
Brexit angst (or Brexangst, you saw it here first), together with the resulting political overspill of resignations and new Prime Minsters, has certainly made for sensational stuff where news output is concerned.
We’ve seen an entire changing of the guard in the Labour Shadow Cabinet albeit with a contrasting, Teflon-like approach from the top; a vacancy at the top of UKIP; a plunging pound and some hysterics in the stock market especially focused upon the banking sector and housebuilders. Poor Foxtons saw a 35% drop in share price the day after the EU vote, equal to £100 million being wiped off of their valuation. Ironic really, considering that they themselves have a propensity to overvalue properties as a means of attracting new sellers to instruct them.
The financial Armageddon that many in the Remain camp prophesied as a direct threat to would be Leave voters, was a scary prospect. Project Fear indeed.
Yet despite a brief FTSE wobble, now recovered and a watering down of some stocks that were probably overvalued anyway, the gates of financial hell do not seem to have opened. Even the Chancellor (now ex-Chancellor as I write this) has had a vole face on his predictions for higher unemployment, increased interest rates, UK company headquarters being ceremoniously boarded up and transferred box by box to Hamburg; empty bank vaults… that sort of thing. In fact, the pro-European political elite that told us stories of impending meltdown should we dare to extricate ourselves from Brussels, have all now relented and decided that it’s all ok after all. Nothing but nothing bad has happened.
So, to the property market. The Treasury explained that we would see ‘falls in house prices of 18%’. Buyers would suddenly disappear. Sellers would retreat en masse never to venture to sell again. And mortgage companies would spite us all.
The truth is, three weeks on, that the estate agency industry is reporting business as usual. Unless they operate in a posh London area above £5m where, as has been the case for over a year, the market is waning. Here at eMoov, we are listing properties at the same rate as usual. Viewings are at a high level and our sales are at an all time high. Fall out from the Brexit vote on the Friday after the night before then resulted in less than 1% of our pipeline of 860 sales falling through in the next two weeks.
The strength of the UK property market should not be underestimated, as some seem to have done:
- There is a shortage of housing being built that is considered to manifest itself as a shortfall of circa 100,000 homes each year
- Our population is growing. Not just through immigration and regardless of whether this is curtailed but because more people are being born and we are all living longer
- Some 20% of properties are now single occupier thereby creating further demand.
- Mortgage rates are extremely low and, in fact, the lowest ever (Barclays, HSBC, Metro Bank, the Leeds Building Society have all reduced their rates since the EU vote outcome). Cheaper repayments means more demand
Structurally, the property market is unchanged. Yes, there is uncertainty and mainly fuelled by the media and by those that perhaps want to be ‘right’ about the dangers of leaving the EU.
Will we see a softening in the property market? Short term perhaps, based solely on misplaced negative sentiment. But medium to long term, no way.
Safe as houses, as they say.
Written by Russell Quirk, eMoov