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Demand for homes in UK falls to three year low, according to estate agents
Uncertainty created by the UK’s decision to leave the European Union has triggered demand for property to fall to the lowest level seen in three years, according to a new report. The number of house sales agreed in May dropped in the run up to the referendum and the majority of estate agents believe that demand will fall further in the short term, according to the latest housing report from the National Association of Estate Agents (NAEA). Estate agents recorded an average of 304 house hunters registered per member branch in May, as uncertainty in the lead up to the referendum stalled buyers. This was down 6% from April, and the lowest recorded since November 2013 when 292 buyers were registered per branch. The data also shows that compared to May 2015 when 383 house hunters were recorded, demand has decreased by 21% year on year. In line with falling demand in May, the supply of houses available to buyers increased marginally from 35 properties available to buy per branch in April to 37 in May. The number of sales agreed in May decreased to an average of eight per branch, a drop from nine in April falling to the same level seen during the seasonal slowdown in January. In May some 41% of agents predicted that house prices will fall and 30% expect demand will also decrease as a result of a the referendum result. Although the number of house hunters registered per branch and sales agreed fell in May, sales to first time buyers increased marginally. Some 27% of the total sales completed last month were to first time buyers, an increase of one percentage point from April. ‘The EU referendum without doubt meant that May was a month of uncertainty for potential house buyers and demand dropped significantly and is currently at the lowest level we have seen in the last three years,’ said Mark Hayward, NAEA managing director. ‘As a result of the vote for a Brexit, we expect international investors to look a lot harder at the UK as a potential market to buy in and this will have a knock on effect on the house building sector, as investments may be delayed or put off completely,’ he pointed out. ‘Although in the short term, we believe that house prices will remain stable, we cannot be certain about the next quarter as political uncertainty and market unrest could affect the housing market,’ he explained. He also pointed out that the supply of available housing is still extremely low compared to this time last year, which is particularly worrying. ‘As we continue to say, there are simply not a sufficient number of homes available in this country to cater for everyone’s needs and a Brexit could impact the skills required to drive property developments in the UK,’ said Hayward. ‘This means that… Continue reading
UK remortgage figures up in May, but uncertainty could now creep in
Last month was the best May for remortgaging since 2008 but uncertainty and volatility are now expected following the decision by the UK to leave the European Union. Remortgaging reached £5 billion in May and the number of loans reached 32,334, higher than every May since 2008, when 77,100 loans were approved while the average amount of equity withdrawn reached £33,600, the highest amount this year and 43% up from the previous month. However, despite record low interest rates, borrowers felt the pinch due to falling incomes, according to the research from LMS. Remortgage lending was up by 26% compared to May of last year but was down by 16% from April, which was an exceptional month for remortgaging. The number of remortgage loans also decreased month on month by 7% from 34,800 in April to 32,334 in May but this is 31% more than May 2015 when 24,700 borrowers remortgaged. The average amount of equity withdrawn per customer from remortgaging activity has risen by 43% month on month, from £23,479 in April to £33,691 in May. The average amount of equity withdrawn is also up by a quarter in comparison to May last year when equity withdrawn stood at £26,863. The total amount of equity withdrawn rose by 33% over April from £817 million to £1089 million in May, some 64% more year on year from the £664 million recorded in May 2015. This is also the highest amount of total equity withdrawn since May 2008, back when remortgagors withdrew almost £1.21 billion. Despite being the lowest interest rate on record, however, average household income fell from £50,000 in March to £44,898 in April. A drop of 10%. The household income recorded in April 2016 is also 1% lower than in April 2015, when income was recorded at £45,365. ‘Remortgaging witnessed its best month of May since 2008, although the numbers are slightly down following a rush to remortgage in April. The favourable mortgage market, with eagerly competitive lenders, record low rates and rising house prices provided the ideal background remortgaging to continue its year on year surge,’ said Andy Knee, chief executive of LMS. ‘We will have to wait and see what the impact of June’s Brexit decision on the housing and mortgage markets will be in the short and medium term. There will be some uncertainty and volatility to cope with as everyone absorbs the news and this is likely to put a dampener on the housing market at least until the autumn,’ he pointed out. ‘However, interest rates remain at historically low levels and for those with a mortgage now is a great time to take out a fixed rate and stabilise their financial outgoings. Lenders may well come under pressure and their appetites for new business may shrink in the short term. If they do, the range of excellent rates available today might not be around… Continue reading
Easier monetary policy could weaken Brexit effect on UK real estate
The hit to UK real estate sentiment that many experts predict will be sparked by the vote to leave the European Union may be limited by easier monetary policy, it is claimed. While uncertainty in the run up to the referendum had little effect on domestic real estate pricing this year, investment activity slowed but an analysis report suggests that this hasn’t been exclusively caused by Brexit fears but largely reflects greater investor caution as the market reaches the top of the cycle. However, according to Chris Unwin, head of global research at Aviva Investors, the vote to leave suggests there is now little hope of any bounce in sentiment. ‘Indeed, it may be many years until we have clarity on the UK’s constitutional arrangements and trading agreements,’ he said. He pointed out that the financial markets’ reaction to the vote was swift and dramatic with Sterling falling to its lowest against the US dollar in over 30 years and 10 year gilt yields reaching a record low. And, as equities plunged, real estate shares were particularly badly hit. He believes that mounting fears of an economic shock and in the short term, uncertainty as to the UK’s constitutional arrangements and trading agreements, will dampen activity and may trigger a recession by the end of 2016. In the longer term, the economy is likely to be impaired by reduced access to European markets and poorer demographics, weakening the UK’s fiscal position and potentially damaging productivity growth. On top of this calls for a second referendum on an independent Scotland will grow and great further uncertainty. ‘Domestic capital values now look likely to decline moderately over the remainder of the year. It is worth noting, however, that some commentators believe Brexit will hit real estate returns, and the economy, more severely. By contrast, we had expected to see a slight increase in capital values over coming months had the UK voted for the status quo,’ explained Unwin. He expects to see prolonged illiquidity in real estate markets pending renegotiation of international agreements and transaction activity to be low while heightened risk aversion will reflect lower growth expectations and political risk. ‘To compensate, some widening in yields is probable. Secondary assets are likely to be hit even more,’ he added. However, Sterling depreciation could support demand from overseas investors but Unwin pointed out that this needs to be balanced against the UK real estate market’s diminished ‘safe haven’ status along with additional caution in Scotland resulting from pressure for a further independence referendum. Unwin thinks UK occupier markets could be affected significantly less than investment markets. ‘In the short term, a rapid deterioration in the labour market is not expected. Demand for space is not set to fall rapidly,’ he said. ‘If the weakness of sterling is maintained, UK retailers could be hit, particularly those operating on low margins. On the other hand, it may boost prospects for markets dependent on tourist spending, like prime central… Continue reading
