Brexit vote ravages sentiment in UK housing market
LONDON – Last month’s Brexit vote had an immediate impact on Britain’s housing market, causing buyer interest and expectations of future sales to wither at the fastest pace in years, a survey showed on Thursday.
The Royal Institution of Chartered Surveyors said uncertainty fuelled by the Brexit vote prompted a “marked drop” in housing market activity.
The survey’s headline price balance fell to +16 from +19 in May. While economists polled by Reuters had expected a bigger fall, this was the lowest reading since January last year.
Published hours before the announcement of a crucial Bank of England policy decision, the RICS survey adds to signs the referendum result is already having a marked impact on the economy.
New buyer enquiries fell at the fastest rate since mid-2008, around the time Britain tipped into recession as the global financial crisis escalated.
Expectations of future sales declined at the fastest pace since records began in 1998, while the balance of surveyors expecting house prices to fall in the next three months rose to its highest in just over five years.
“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,” said RICS chief economist Simon Rubinsohn.
The survey was conducted after the result of the referendum became clear on June 24. The ‘Leave’ vote sent sterling to its lowest level against the dollar since 1985 and raised fears that Britain is heading into recession.
The RICS figures will interest BoE officials, who are expected to cut interest rates to a new record low 0.25 percent later on Thursday to help ease the shock to Britain’s economy from Brexit the vote.
“Respondents to the survey are understandably cautious but with interest rates heading lower and sterling significantly so, it remains to be seen whether the concerns about a possible stalling in both corporate investment and recruitment are justified,” Rubinsohn added.
A separate survey from property website Rightmove showed the number of new properties advertised to rent increased by 8 percent in the second quarter, a consequence of a surge in buy-to-let property purchases in the first quarter as investors tried to beat the introduction of a new tax.
Rightmove said there was a dip in interest from tenants on its website in the three days after the referendum result, but it bounced back to usual levels thereafter.
A report from the Institute of Fiscal Studies on Thursday showed that only around half of children in middle-income households live in owner-occupied housing, down from over two-thirds 20 years ago. The lack of affordable property for ownership is one of the biggest social problems facing Britain’s new prime minister, Theresa May. -Reuters