With Brexit dominating the headlines, it’s increasingly difficult to ignore, especially with so much yet to be resolved. For the moment, though, it is not having as big an effect on the housing market as you might expect, especially outside of London and the Southeast.
According to Hometrack, discounts on asking prices – a good measure of the strength of demand – have been reducing rather than increasing in most of the larger regional cities. The UK average is 3.5%, but buyers are getting just 2% in places like Manchester and in Liverpool the discount is at its smallest for 5 years.
In contrast, London’s average discount rate is 4.8%, although not all of that can be attributed to Brexit. Since 2009, house prices in London have risen by 84%, running substantially ahead of wage growth, stretching both affordability and reducing yields for buy to let investors. At the same time, tougher lending criteria has put a cap on spending power.
However, with negotiations reaching a critical point and the shape of the likely outcome changing by the day, Brexit will almost certainly have a more marked effect on confidence during the Christmas and early New Year period in what is already one of the quieter times of year for the housing market.
However, once there is some kind of agreement in place, this process is likely to be reversed, releasing some of the pent-up demand that has been building since the referendum in the summer of 2016.
Robert Gardner, Nationwide’s Chief Economist, says:
“If the uncertainty lifts in the months ahead and employment continues to rise, there is scope for activity to pick-up through next year. The squeeze on household incomes is already moderating and policymakers have signalled that, if the economy performs as they expect, interest rates are only expected to rise at a modest pace and to a limited extent in the years ahead.”
The most up to date index, Rightmove’s, shows new sellers are now responding to the uncertainty by lowering their asking price aspirations in order to generate interest. At the same time, sales volumes are slightly up on last year, suggesting some buyers are using the opportunity to pick up a bargain before prices rise once a Brexit deal is concluded.
And finally, everyone at Global Asset Finance Limited would like to wish you a very Merry Christmas and a prosperous New Year.
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