We already reported a marked cooling in the volume of residential property transactions prior to the referendum. In the immediate aftermath of the shock result whilst the dust attempts to settle, many commentators appear to agree that it is still too early to say what the effect of Brexit will have on the property sector, both residential and commercial.
Discounting prices through negotiation was always rife in London's housing market, but has definitely stepped up a gear since the result, with vendors accepting that they must drop asking prices in order to offload property. At the same time buyers have become more demanding than ever, seeking out deals that will insulate them from possible future price falls as the UK's separation from the EU begins to take shape.
According to a post-referendum market survey by the Royal Institute of Chartered Surveyors (Rics), house prices were expected to fall across the whole of the UK within the next three months. Obviously this is welcome news to first-time buyers but disappointing to property investors and many homeowners.
Simon Rubinsohn, the chief economist, said "Rics data does suggest that the dip in activity will persist over the coming months, but the critical influence looking further ahead is how the economy performs in the wake of the uncertainty triggered by the vote to leave".
It has also been widely reported that the supply of homes plummeted at the sharpest rate since records began in 1998, while the number of agreed sales has fallen to the lowest level since mid-2008 – partly due to sluggish demand and lack of supply, and partly due to the continued lull after the recent stamp duty hike for buy-to let investors.
A report by the Bank of England also found that lenders were expecting demand for mortgages to fall following the vote. Yet the Council of Mortgage Lenders suggested that the effect of the referendum result on the housing market would not be immediately clear. The decision by the Bank of England as to whether to alter the base rate is also likely to affect the market further.
In conclusion, it does appear that the fall in transactions is likely to be shallow, or at least significantly shallower than the crash of 2008, as a shortage of supply continues to undershoot demand and the economy is expected to slow rather than slump.
The Brexit result may well be the catalyst for what many regard to be a long overdue correction in the market generally. With a fall in the value of the sterling – much like in 2009 – there will also be overseas discretionary buyers who will see this as an opportune time for property investment.
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