Demand for residential property across the UK has fallen to one of the lowest levels on record as prospective buyers and sellers postpone investment ahead of the EU referendum, according to a new report.
The study by the National Association of Estate Agents (NAEA) examining housing market activity in April has revealed a sharp slowdown in demand for homes across the UK, owed largely to the looming referendum as well as the recent buy-to-let stamp duty changes.
“The upcoming EU referendum means we’ve entered a period of uncertainty, as buyers put off their hunt in anticipation of the result, and what might happen to prices as a result,” said Mark Hayward, managing director, NAEA.
The NAEA report shows that demand for property dropped by a fifth in April, with 325 house hunters registered per member branch on average last month, down from 417 in March.
Last month, the supply of residential properties available for buyers also fell, down 35% month-on-month from 54 properties available in March, to 35 in April.
Almost a quarter (24%) of estate agents expect house prices to decrease and a further one in four (23%) expect demand to decrease if Britain votes to leave the EU in June.
Hayward continued: “It’s no surprise that demand dropped significantly in April. Eight in ten agents saw an increase in purchasers trying to beat the buy-to-let stamp duty changes before the April 1st deadline, so we expected to see a slowdown immediately following the deadline.
“Whilst the number of house-hunters registered per branch dropped in April, the supply of available housing to buy also fell quite sharply, so supply and demand are still moving in the opposite direction, rather than balancing out.”
However, despite the slowdown in demand for housing, one in three estate agents expect sales to first-time buyers to increase following the buy-to-let stamp duty changes, as buy-to-let landlords exit the market, potentially freeing up properties for those seeking to acquire a home for the first time.
A separate report from Your Move & Reeds Rains shows that first-time buyer sales soared in April following the buy-to-let stamp duty changes, leading to the highest monthly sales total since June 2014.
In total, there were 32,300 completed first-time buyer transactions in April, up 14.9% from 28,100 in March 2016. This was despite the fact that first-time buyers paid an average of £168,656 in April - over £20,000 more than a year ago.
Adrian Gill, director of estate agents Your Move and Reeds Rains, commented: “This surge in sales shows that demand is steadfast among first-time buyers – despite upward movement in house prices. In the short-term, first-timers may be finding that competition for properties has eased slightly following a period of intense pressure on landlords to meet the stamp duty surcharge deadline at the beginning of April.”
But “scratch beneath the surface” of these positive monthly figures and Gill says that a “darker long-term picture emerges”.
He added: “The government’s restrictions on the buy-to-let sector may seem to play into the hands of today’s first-time buyers, but future first-timers could pay the price. Demand for first-time properties to buy remains red hot, but demand for cheap properties to rent is also searing – fuelled by a swelling population and increasing desire among many to move around the country following career opportunities.
“Cutting landlords out of the equation will simply drive this demand harder still, pushing up rents, and making saving for a deposit for a first-home more difficult. First-time buyers are tenants too.”