What does Brexit mean for UK property market? Experts warn of house price reverse as sales to plunge by up to 20%
Britain's property boom is expected to end following the Brexit vote, housing experts warned today.
Some predicted heavy falls in sales and valuations in the months ahead amid the uncertainty surrounding Britain's exit from the European Union. Richard Donnell, a director at property specialists Hometrack, said: 'The near term prospects for the UK housing market now look very uncertain.'
He explained: 'The immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short term impact on financial markets and the economy at large.
'History shows that external shocks can reduce sales volumes by as much as 5 per cent to 10 per cent nationally, and 20 per cent in London with sales volumes in the capital already down over the last year.'
The drop in sales is expected to hit house prices, with Howard Archer, chief economist at IHS, predicting a fall in values of 5 per cent during the second half of 2016 and another 5 per cent drop next year.
However, the Bank of England's Mark Carney spoke immediately after the Prime Minister's resignation this morning to reassure the financial markets, including those invested - or looking to invest - in the property market.
He said: 'We will not hesitate to take any additional measures required.'
These measures could include a cut in interest rates that could reduce homeowners' monthly mortgage payments - a measure repeatedly taken during the financial crisis of 2008.
James Roberts, chief economist at Knight Frank, said: 'In the light of the above risks we expect the Bank of England, seasoned by the experience of financial crisis, to respond quickly. An interest rate cut of 25 basis points is a strong possibility at the Monetary Policy Committee's July meeting, or perhaps earlier if required.'
He added: 'We may also see a return of quantitative easing, if there are signs that investment is deteriorating. This should in our opinion help restore confidence as the summer progresses.
'The underlying strengths of the UK economy remain in place, and ultimately real estate is an investment that works best for those who pursue long-term goals.'
Ultimately, it will be down to how confident buyers feel in the months ahead.
'No market likes uncertainty, the housing market least of all
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: 'When there is uncertainty it affects confidence and people put off making decisions.
'Those who were thinking about buying property may now decide to leave that decision to say next year, in the hope that property prices will fall in the meantime.'
Buying agent Henry Pryor said: 'No market likes uncertainty, the housing market least of all. We now have uncertainty with a capital U and buyers - the party that decides what a property is worth - will now be sitting on their hands wondering at what level they should commit.
Experts said a strategy to manage Britain's exit from the UK was required to help iron out the certainty and allow buyers to plan head.
Hometrack's Mr Donnell suggested that the decision to leave the EU will impact the London housing market the most.
He said: 'The decision to leave the EU will be most keenly felt in the London housing market, which is fully valued and already facing headwinds.
'Across London, where house price growth is running at 13 per cent, we expect the rate of growth to slow rapidly on greater uncertainty and market activity in the capital is set to remain disrupted until consumers and the financial markets can see a clear strategy to manage the process to a position where the outlook for the economy, jobs and mortgage rates becomes clearer.'
Stuart Law, chief executive of Assetz Property, said: 'Today's result to leave the EU has only increased the cloud of uncertainty cast over the British property market, but it is not the time to just sit back and watch the events unfold.
'We still expect prime London prices to continue falling and many of the tens of thousands of luxury homes in the pipeline to be mothballed as demand from all over the world fails to meet that potential level of supply.
'The rest of London will definitely be hit by a perfect storm of several factors hitting house prices which is great news for house-buyers but not for investors and homeowners.'
Experts urged buyers to focus on long-term property goals, with Jeremy Leaf, a north London estate agent, saying: 'In the medium to longer term, the underlying strength of our economy will drive activity and investment.
'The UK and particularly London property markets are long-established and sophisticated so have always attracted investment and should return to some form of normality, whatever that means now, after an initial period of indecision. It's now up to the politicians to keep the changeover and time for reflection as short as possible although we may anticipate waiting up to two years before more major economic decisions are taken.'
Hamish Pound, senior investment manager at IP Global, said: 'Despite short-term turbulence, the longer term trajectory for the UK property market is onward and upward, driven by the UK's resilient and globally-focused economy, transparent legal system, cultural, educational, lifestyle offerings, and rich history of adaptation and evolution.'
'No market likes uncertainty, the housing market least of all
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