The UK housing market is stuck in a holding pattern as buyers wait for more clarity on Brexit before committing to a purchase that could prove unwise if Britain crashes out of the EU in October.
Political and economic uncertainty has driven UK residential transactions at Savills to their lowest level since the financial crisis, the estate agency, one of the nation’s largest, said in its half-year earnings report on Thursday.
A fall in home sales was also revealed in the July survey by the Royal Institute of Chartered Surveyors, and earlier this week Halifax said sales had dropped during the early months of the summer.
Simon Rubinsohn, chief economist at RICS, said: “The latest RICS results will provide little comfort for the market, with all the key indicators pretty much flat-lining.”
He added: “The forward-looking metrics on prices and sales also seem to losing momentum, as concerns – clearly voiced in the anecdotal feedback – both about Brexit and political uncertainty heighten.”
Economists agree that the housing market will suffer if Britain leaves the EU without a deal.
The government’s spending watchdog, the Office for Budget Responsibility (OBR), forecast last month that house prices would tumble by almost 6 per cent in 2020 and another 3 per cent in 2021. The slide could be even steeper as the OBR’s prediction was based on the assumption of a particular type of no-deal Brexit – the less disruptive of the two laid out by the IMF earlier this year.
Howard Archer, economic adviser to the EY Item Club, forecasts a similar decline, saying house prices would quickly fall by about 5 per cent as the economy weakened and the market was mired in acute uncertainty over Britain’s future trading relationship with the EU.
For now, house prices look on track for hardly any growth over this year.
According to RICS, a net balance of 9 per cent of respondents reported a fall in average prices over the past three months in England and Wales. Samuel Tombs, economist at Pantheon Macroeconomics, said the result is consistent with the official measure of prices showing a rise of only 0.5 per cent in 2019.
Halifax data also showed that UK house prices dropped slightly in July for the second consecutive month and now stand at £236,120 on average.
“The market continues to tread water,” said Russell Galley, managing director at Halifax.
“In the longer term, we believe there is unlikely to be a step change in market activity until buyers and sellers see some form of resolution to the current economic uncertainty.”
RICS echoed this prediction, noting that its survey now points to zero growth in sales – as well as a steeper fall in prices – in the next three months.
On Thursday Boris Johnson reiterated his trademark message that Britain will leave the EU on 31 October, even though no progress has been made on securing a withdrawal agreement acceptable to both sides.
