Brexit Hits U.K. Housing as Sales Decline Most Since 2008by
RICS price-growth index falls to lowest level in three years
Sales balance at minus 34, weakest since financial crisis
Brexit is undermining the near-term outlook for the U.K. housing market, with both demand and sales dropping in July, according to the Royal Institution of Chartered Surveyors.
The London-based group said new buyer inquiries fell for a fourth month, while its index of sales is pointing to the fastest decline in transactions since the global financial crisis in 2008. Prices continued to rise, but at the slowest pace in three years. Just 5 percent more surveyors recorded an increase than a fall, compared with 15 percent in June.
Britain’s vote to leave the European Union has undermined confidence among U.K. consumers and increased worries about their finances and property values. That’s curbing demand for housing, though a worsening supply picture is proving some support to prices, according to RICS. New sales listings are falling at a record pace, it said.
Separately, Acadata and LSL Property Services said house prices rose just 0.2 percent in July, slowing the annual growth rate to 5.5 percent from as high as 8.9 percent in February. They also reported that transaction volumes are down by 20 percent compared with the second quarter of 2015.
The recent drop in demand in the RICS index is also related to a government tax change in April, which saw landlords rush to the market in the first quarter to avoid a higher levy on purchases of investment properties.
The downturn has punished the shares of companies serving the property market. The FTSE 350 Real Estate Investment and Services Index has lost 15 percent since the June 23 Brexit referendum, making it the worst-performing sector. The FTSE 350 Index overall has gained more than 7 percent.
Prospective buyers received a boost last week when the Bank of England cut borrowing costs, and RICS said the outlook for the housing market appears brighter, with 12-month price expectations rising to 23 in July from zero in June. “Confidence remains more resilient than might have been anticipated,” said RICS Chief Economist Simon Rubinsohn.
The return of political stability following the resignation of David Cameron on June 24 may also be bringing a measure of optimism to the housing market, analysts say.
“The data are consistent with the notion that, helped by a rapid resolution of the political vacuum, the initial shock and uncertainty surrounding the Brexit vote has begun to recede,” said Hansen Lu, a property economist at Capital Economics.
During her leadership campaign, new Prime Minister Theresa May spoke of the need to plug the U.K.’s “housing deficit” to tackle inequality and stimulate growth.