Brexit becomes a reality…and the Prime Minister resigns. How did the property industry react?
A double whammy last week for all of us as we face the far-reaching repercussions of the UK voters’ choice. Not just the short, medium and long term effects of leaving the European Union, but a departing Prime Minister, the fuss of choosing a new Conservative leader and, thus, a new cabinet and, most likely, another General Election. And that’s just for starters.
What have we done?
The Twitter-sphere is awash with young people blaming ‘old people’ for wrecking their future. ‘Old people’ were described as the age bracket 25-49. Wasn’t it ‘old people’ who, after all, voted us into Europe in the first place? However, the Brexit comment had seemingly blown itself out and agents are back to promoting their services and properties, successes and positive thoughts for the future.
The Negotiator team has been hearing from many property commentators, who are generally taking a reasonably brave and positive view – once the initial shock settles.
James Roberts, Chief Economist at Knight Frank says that the value of the pound will inevitably fall in the near-term, as will the stock market. The chance of a technical recession, as business investment is curtailed, is high, and exporters and financial services firms will be in the forefront of the downturn.
“In the light of the above risks we expect the Bank of England to respond quickly. An interest rate cut of 25 basis points is a strong possibility at the Monetary Policy Committee’s July meeting, or perhaps earlier if required. We may also see a return of quantitative easing, if there are signs that investment is deteriorating.
“This should in our opinion help restore confidence as the summer progresses.
“Ultimately, it should be remembered that the UK is a country with 60 million wealthy consumers, and a high skill workforce. Consumer goods firms like Coca Cola and BMW will always want to access a market this big. Skills based employers like PwC and Google will always want to access such a large pool of talented workers.
“The underlying strengths of the UK economy remain in place, and ultimately real estate is an investment that works best for those who pursue long-term goals.”
Michael Robson, Andrews Property Group “The UK’s decision to leave the EU means that the uncertainty of the last few months, which has negatively impacted the market, will now continue and it’s hard to judge for how long this will be the case. This isn’t good news for homeowners.
“Previous market cycles suggest that timescales for recovery tend to be slow and long and we should be prepared for anything between three to five years for any significant bullishness to return.
“However, let’s not lose sight of reality. The underlying drivers of the property market (namely demand) will not disappear and so the market will recover as will prices. This presents a great opportunity for purchasers – especially those taking their first step on the property ladder – as they’ll have the opportunity to buy during the current lull and then reap the benefits as the market recovers.”
Richard Donnell, Insight Director at Hometrack believes that the immediate impact is likely to be a fall in housing turnover and a rapid deceleration in house price growth as buyers adopt a wait and see the short term impact on financial markets and the economy at large.”
“The decision will be most keenly felt in the London housing market which is fully valued and already facing headwinds. History shows that external shocks can reduce sales volumes by as much as 20 per cent with sales volumes already down over the last year. House price growth is already weak and running in low single digits in central London areas and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity.”
Martin Robinson, Director of Sales at Hunters Property Group takes a quietly positive view, “The impact on the UK property market will be difficult to determine until the negotiations between the UK and EU are finalised. We expect some clients to pause to familiarise themselves with this news, but in the past we have found the UK property market has been very resilient against changes in legislation. At the end of the day, bricks and mortar will always be a good investment option in the UK.”
David Brown, CEO of Marsh & Parsons, sums up the thoughts of many commentators this morning.“Whatever result you were hoping for on a personal level, it’s hard to argue against the fact that this result will bring further uncertainty and also creates far more questions than it answers in terms of what happens next as Britain extricates itself from the continent in terms of procedures and processes. It’s also worth noting that if the pound weakens against the Euro as some have predicted, then it could lead to a significant increase in overseas property purchases – not bad news in itself, but unlikely to have been among the intentions of many ‘leave’ voters.
“On the plus side, it makes the picture clearer for any individuals who were sitting on their hands, waiting on the outcome of the result to make their move. It’s also worth putting things into a wider perspective. Regardless of the referendum result, there is still plenty of pent-up demand in the UK housing market and a leave vote doesn’t change that overnight. The decision to leave doesn’t alter the fact that plenty of people have to and still want to move.”
Andy Martin, Senior Partner at Strutt & Parker said, “I am personally disappointed because I do not think there has been a case made to say what it means in terms of the governance, the running of the country and the changes in the legislation we would want to see. It is going to cause a huge amount of disruption to the markets while everybody takes stock of what it actually means and the government starts giving us clear policy direction. Before then we are going to have volatility, which is a risky thing to have in these markets because economic performance is still not something that is a given.
“As a firm, we are market driven. The market has shown signs of volatility in the lead up to this vote. We have seen a real cutback in trading due to the uncertainty of this vote. What we are now waiting to see is how our clients and markets will react to this. I suspect that they will continue to tread with caution until they can see the outcome. We have already seen in the currency markets that this is the case, with sterling being marked down. Everybody will say that makes the UK cheaper but, at the same time, instability affects the confidence of markets. I suspect this will be the overriding factor for the next period.”
The final word (for today) goes to Rob Clifford, Chief Executive of CENTURY 21 UK and Group Commercial Director of the SDL Group
“The vote to leave the EU presents the UK housing and mortgage market with a number of potential risks and challenges simply because of the uncertainty we are now faced with. While EU membership has often meant increased regulation for our sector – which can often be unwelcome and in my view often disregards the maturity and complexity of the UK housing and financial services market – our view on the Referendum was always one based on delivering the maximum stability for all, and therefore we would quite clearly have preferred a vote to Remain.
“Pre-vote there were a number of predictions of a negative impact in terms of house price levels and housing transaction numbers brought about by a vote to Leave, and there are obviously concerns that these predictions will now be played out. In terms of the result itself we don’t regard it as having any direct detriment to the SDL Group, its businesses, or any of the services we offer to thousands of consumers each year.
“However, we remain anxious about the much broader, potentially negative macro-economic impact this result could deliver. We do remain committed to the markets we operate in and will be working incredibly hard to ensure customer satisfaction across all of these.”