Uncertainty fuelled by the EU Referendum has resulted in a marked drop in activity in the South West housing market, according to the RICS UK Residential Market Survey, June 2016.
New buyer enquiries declined significantly across the UK in June, with 36% more chartered surveyors nationally reporting a fall in interest - this is the lowest reading since mid-2008. The South West fared somewhat better however, with just 4% more respondents reporting a decline in buyer demand (as opposed to a rise). Nevertheless, this does follow a particularly steep decline during May.
The South of the UK, in particular Central London has been the hardest hit, suggesting both the EU result and the tax changes, which took effect at the beginning of April, as having an impact on sentiment.
There was a further fall in the supply of properties coming available for sale across the region in June, which is echoed across much of the UK. This highlights the continuing challenge presented to the market by the lack of stock. In the South West, 23% more chartered surveyors saw a fall in new instructions in June from a net balance of -18% in May. The national figure points to an even steeper monthly decline, with 45% more surveyors reporting a fall in new instructions.
Roger Punch FRICS of Marchand Petit comments: “Across the South West the mood of the market has certainly been subdued, but there are some signs of confidence returning. Optimistically priced properties have inevitably been challenged and, while the transaction volume is now likely to increase, prices are set to be flat for the time being”.
Completed sales fell for a second month in succession in the region over the month. What’s more, respondents expect this trend to continue in the short term; with 21% more predicting a fall rather than a rise in residential sales.
Looking further ahead over the next 12 months, sales expectations have turned negative for the first time in four years with 12% more contributors nationally expecting transactions to fall rather than rise.
House price growth weakened in June and although prices are still rising, they are doing so at a more moderate pace. 17% more respondents noted a rise in prices, rather than fall, across the region. London remains the only area where respondents are seeing prices fall (-46% net balance) with this largely being concentrated in the central zones. That said, near term price expectations are now in fact negative across the South West with 11% more respondents expecting to see prices fall rather than rise over the next three months.
Simon Rubinsohn, RICS Chief Economist, commented:
“Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity. However even without the build up to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year, following the rush in many parts of the country from buy to let investors to secure purchases ahead of the tax changes.
“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. 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’’