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Transaction Volumes Fall in the UK Following Referendum

New Data Suggests Dip in Activity Will Persist

Uncertainty fuelled by the European Union referendum has resulted in a marked drop in activity in the UK housing market with new buyer enquiries down significantly across the country.

In June some 36% more chartered surveyors nationally reporting a fall in interest, the lowest reading since the middle of 2008, according to the latest month residential market survey from the Royal Institution of Chartered Surveyors (RICS).

The South of the UK has been the hardest hit, with anecdotal evidence 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 to market across the UK in June, with the exception of Northern Ireland. This highlights the continuing challenge presented by the lack of stock, according to Simon Rubinsohn, RICS chief economist.

The report also shows that 45% more chartered surveyors saw a fall in new instructions in June from a net balance of -31% in May, the steepest fall on record and extends a trend that has been in place since 2014.

The market has also seen further decline in sales this month with a third successive monthly drop in activity. Contributors expect this trend to continue with 26% more respondents anticipating a further drop in sales across the UK over the next three months. This is the most negative reading for near term expectations since 1998.

House price growth saw a reduction in June and although prices are still rising, they are doing so at a more moderate pace with 16% more respondents reported having seen prices rise rather than fall across the UK.

London remains the only region where respondents are seeing prices fall with a -46% net balance but this is largely being concentrated in the central zones. ‘That said, near term price expectations are now in negative territory across the whole of the UK with 27% more respondents across the UK expecting to see prices fall rather than rise over the next three months,’ Rubinsohn pointed out.

He also pointed out that looking further ahead over the next 12 months, sales expectations have turned negative for the first time in four years with 12% more contributors expecting transactions to fall rather than rise.

Significantly, over the next 12 months the dip in prices is only expected to persist in London and East Anglia with net balances of -39% and -34% respectively, and longer term, prices are still expected to rise, albeit a little less than previously anticipated, with a cumulative increase of 14% projected for the next five years.

Rent expectations over the same time horizon remain more resilient and are still broadly consistent with an increase of just over 20%, the report also shows.

‘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,’ Rubinsohn said.

‘Our 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,’ he added.

‘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,’ he concluded.