Brexit? You’ve seen nothing yet - by Jessica Foreman

Friday, 2 September 2016
British estate agents say that the ‘Brexit’ vote has not had an impact on the property market, but have been warned that the worst is yet to come.

A nationwide ‘temperature check’ of the state of the market, conducted just over a month after voters said they wanted the UK to leave the European Union, found that the ballot had made little, if any, difference. But experts fear the current period is merely the calm before the storm.

Looking at the mood of agents right across the country, the survey found that under a fifth (17 per cent) said Brexit had had a noticeable impact on business, with 73 per cent arguing it had had no bearing just yet.

The rest felt they could not say either way yet and were waiting to see if sales picked up after the traditional summer holiday slump.

Many estate agents experienced a slowdown in the days either side of the June 23rd vote, with caution setting in throughout June and only easing once the next Government was in place. Some did, however, see deals fall through the very next morning.

The snap survey adds to the findings of other studies that have looked at house price data and made projections for the future, as the market aims to assess what the true impact will be of the EU referendum.

Nationwide, the UK’s biggest building society, said property prices actually rose 0.5 per cent from June to July – matching the mood of the estate agents in the temperature check. The average UK home is now valued at £205,715 according to Nationwide, up 5.2 per cent on July 2015.

It did, however, say that the impact might be felt in the coming months as longer term data is made available.

Robert Gardner, Nationwide Chief Economist, said: "Any impact from the vote may not be fully evident in July's figures, as there is a short lag between a buyer making the decision to purchase a property and applying for a mortgage.

"In the near term, increased economic uncertainty may lead to weaker demand for homes. Leading indicators are consistent with softening ahead. Household confidence fell sharply in the wake of the referendum result, especially attitudes towards making major purchases, which in the past has correlated with mortgage activity, though less closely in recent years.

"How the labour market evolves will be crucial in determining the demand for homes in the quarters ahead."

Predictions are mixed, but many people feel there will certainly be some impact in the next two years.

The Centre for Economics and Business Research (Cebr) said growth could well be weaker in 2016 and 2017, but feels the trend beyond that will be towards growth, with the average house worth about £40,000 more in 2021.

This comes despite the fact that some bigger agents in London are already reporting a big drop in profits. Foxton’s recently reported a drop in pre-tax profits of 42 per cent for the first half of 2016, down from £18.1 million to £10.5 million.

Its chief executive Nic Budden said: “The result of the referendum to leave Europe is likely to lead to a prolonged period of further uncertainty and we do not expect London residential property sales markets to show signs of recovery before the end of the year.”

Fellow estate agent Countrywide reported a 25 per cent drop in pre-tax profits for the same period, while French bank Société Générale reckons prices could fall by more than 30% in the capital – or up to half in more expensive areas – with the London bubble bursting as a result.

It’s likely that the true impact will become apparent by early 2017.

Elliott Castle, managing director of We Buy Any Home, said: “Brexit had an immediate impact on the property market. A large number of people are withdrawing from property purchases and property chains are collapsing. The market is seeing significant price reductions and there has been a slow down on new properties entering the market.”

The snap survey of estate agents across the country revealed:

• Current price slowdowns can be explained as a result of a normal ‘school summer holiday’ drop off – but this won’t be clear until September when this would normally pick up
• Some agents even noted an upturn post-Brexit, with buyers and sellers more cautious before the referendum than after
• Property is still seen as a ‘safe investment’ and some investors are even more likely to put their money in bricks and mortar if they feel there is uncertainty in the markets
• Any impact to drive people towards ‘staycations’ will serve to boost areas in which there is a tourist economy and where many second homes are bought, giving such locations a separate micro-economic climate

The nationwide estate agent ‘temperature check’ unearthed a flavour of the views of people up and down the country.

One agent in Lincolnshire said: “There was a little bit of a drop off initially but it is back to where it was. The market would always slow down in the school holidays anyway, so we won’t see properly until September.”

One in East Anglia said: “It has not touched us here at all. I worked through 2008 and this is not significant at all compared to that.”

A Berkshire agent said: “On the weekend after the vote we sold £6 million worth of new homes and sales were 20 per cent up on the previous month.”

In York, one estate agent said: “It was a bit quiet in the run up to the referendum but now? It’s as though it never happened.”

A Cornwall estate agent explained: “We are doing very well at the moment, business is good. We are in such a bubble here and people use this area to invest their money in second homes. People see property as a safe investment. Also, if people think it’s too expensive to go abroad then this area will benefit.”

However, one Yorkshire agent said: “There’s certainly not as much stock coming onto the market.”

One north west agent reported: “What’s happening is that everybody is just saying ‘let’s just hold on’. This isn’t just affecting estate agents either, it’s just as quiet for all other businesses in the area too.”

One south coast agent said: “We have had a few pull outs. I’m not sure if it was just because of that but they did mention Brexit.”

A Welsh agent said: “On the morning after we had one buyer – who had more or less agreed a deal – who pulled out overnight and cited Brexit as the reason.”

Jessica Foreman is a Durham University graduate specialising in business and lifestyle based writing. She has developed her skills on projects surrounding The British Broadcasting Company, and running a print and online based magazine whilst at university. She is currently looking towards starting her Masters in Mobile and Personal Communications as well as broadening her horizons through travelling.