Number of homes on the market at record low as Brexit uncertainty hits house prices
TThe number of homes on the market hit a record low in July as house price growth slumped on the uncertainty in the wake of the Brexit referendum.
The level of market activity, such as the amount of new buyer inquiries and the number of agreed sales, continued to fall, according to the Royal Institution of Chartered Surveyors (Rics).
July’s residential housing market survey posted the lowest reading in three years for recent house price growth: just 5pc more of those surveyed saw a rise rather than a fall in prices. Predictions for house price growth in the next three months remained negative across the country.
London and East Anglia are the only areas in the UK where prices are expected to fall in the next year. But over the next five years, surveyors have forecast prices will rise 4pc per year in London, and 3pc nationally. The Rics survey is widely seen as a good indicator of future house price changes.
Samuel Tombs, at Pantheon Macroeconomics, said: "A slight moderation in the rate of decline in demand - the new buyer enquiries balance rose to -27pc from -36pc -appears to have lifted surveyors’ spirits. Contracting supply also is helping to prevent sharp price falls."
Comments made by many of the surveyors indicated that the responses in July were partly due to a seasonal slowdown, as well as uncertainty caused by Brexit.
Part of the problem is that stock levels are at record low levels in many parts of the UK, and there is a lack of properties coming on to the market to replace those sold. The amount of new properties coming on to the market contracted at the fastest pace on record in the last three months.
John Frost, an estate agent with the Frost Partnership in Slough, said: “Since the Brexit [vote] the market seems to be stabilising, although buyers are cautious with their offers. The market, due to the time of year, will quieten and therefore September will be a good test of the strength of the marketplace.”
Hansen Lu, of Capital Economics, said: "If these measures had fallen sharply again this month, it could have indicated a belief that house prices were set for a sustained correction – a belief that could have become self-fulfilling. So the fact that expectations have, at least for now, stabilised is of some relief."
Zoopla, the online property portal, said that in July 32.6pc of properties listed had their prices slashed, but despite uncertainty over Brexit this was an increase of just 1.5pc on the previous month. 17 of the 20 areas with the most reduced properties were in the north of England.
Simon Rubinsohn, chief economist at Rics, said: “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," he said.
“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.”
This survey took place before the Bank of England announced the cut in interest rate.
Moody’s, the rating agency, said that uncertainty as a result of the referendum will slow mortgage lending, particularly in the buy-to-let sector.
It said that this was due to the uncertainty of levels of growth of rental income and house prices. The buy-to-let sector was already depressed after it was hit with a 3pc stamp duty hike in the beginning of April.
Meanwhile, the Financial Conduct Authority is planning to tighten its scrutiny of buy-to-let mortgages given by those lenders which are not banks and so are not already facing tougher rules from the Bank of England's Prudential Regulation Authority. The market for this kind of lending is worth £200bn per year.
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