Housing market bounces back after referendum vote
A trio of data suggests the UK is shrugging off the impact of Brexit with the housing market rebounding to pre-referendum levels.
There was a 16% jump in potential buyers in September, pushing numbers back up to levels not seen since June, while sales agreed rose by 12.5%, according to the National Association of Estate Agents (NAEA).
Separate figures from estate agent Haart also showed a ‘reverse ripple’ effect, with a strong recovery in activity in markets outside of London helping to boost the capital.
Meanwhile, government figures showed the UK’s economy grew by a stronger than expected 0.5% between July and September, providing further support for the housing market.
Why is this happening?
Buyers and sellers appeared to have adopted a ‘wait and see’ approach immediately following the vote to leave the EU.
But the interest rate cut in August is thought to have helped boost confidence, as people expect mortgage rates to remain low for longer than previously thought.
And the figures showing the economy performed better than expected in the first quarter since the referendum is likely to boost confidence further.
Ruth Gregory, UK economist at Capital Economics, said: “The GDP figures confirmed that the immediate economic impact of the vote to leave the EU has not been nearly as severe as many had initially expected.”
Who does it affect?
Data from Haart shows property markets outside of London are recovering quicker than those close to the capital.
The group said estate agency branches around 100 miles away from London had seen a 75% increase in activity during September, and those within 45 miles had seen a 37% rise.
But activity within the M25 had edged ahead by only 1.1%, while it had actually fallen by nearly 7% in south London.
The post-referendum rebound also appears to have left first-time buyers behind, with the NAEA’s figures revealing that sales to this group fell to their lowest level for 10 months in September.
Sounds interesting. What’s the background?
Paul Smith, chief executive of Haart, said the current pattern of a revival in the regions spreading towards London was a complete reversal of the traditional pattern in which the capital is the engine for house price growth.
“This could be a historic realignment of our property market away from central London, or a purely post-Brexit ‘flash in the pan’ phenomenon," Smith explained.
“What is clear is that since June, Britain’s property market has been turned on its head and London, for a change, is beginning to rely on the rest of the country for life-support.”
The fall in sales to first-time buyers is potentially more concerning, particularly as the mortgage guarantee part of the Help to Buy scheme is due to close at the end of the year.
However, August’s interest rate cut and an increase in the availability of loans for people with only small deposits should help to keep mortgages affordable for this group.
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