Residential property prices in the UK look set to fall in the coming months as economic and political turmoil have an adverse impact on the market, a senior economist has warned.
Howard Archer, chief UK economist at IHS global Insight, believes that it is highly likely that the UK housing market will slow over the next few months causing transactions and prices to fall in the process.
“Housing market activity and prices now look to be at very serious risk of an extended, marked downturn following the UK's vote to leave the EU,” he said.
Archer’s views come in spite of the latest figures revealing that home prices are still rising despite heightened market uncertainty.
According to the Halifax, annual house prices rose in June, albeit at a reduced rate of 8.4% year-on-year, which was the lowest level in a year.
The quarterly rate of growth was 1.2%, the slowest since December 2014, taking the average price of a home to a record high of £216,823.
Archer added: “Despite the Halifax reporting a marked rise in house prices in June itself, we believe that the prospects for the housing market have deteriorated markedly following the Brexit vote.”
Despite the somewhat surprisingly brisk rate of growth the Halifax recorded in the run-up to the EU referendum, Jonathan Hopper, managing director of the buying agents Garrington Property Finders, also believes that the tide of the housing market may be starting to turn.
He said: “The pre-referendum market – in which steady price rises were underpinned by limited supply – now feels an age ago.
“The Brexit result means all bets are off, and the market’s psychology has fundamentally shifted. While it’s too early to know how much prices have fallen, sellers are already behaving as if a fall is coming. Many of those who have to sell are starting to offer discounts, often big ones.”
Hopper reports that it is now a ‘buyers” market and that “sophisticated, opportunistic buyers smell blood in the water and are beginning to swoop”.
“This Halifax data is likely to represent the high water mark for prices this year, but now serves as little more than a historical record of the rising market’s last hurrah,” he added.
However, despite the uncertainty in the lead-up to the EU referendum, June’s data from the Halifax not only shows prices still rising, even if at a slower pace, but also that the fundamentals in the housing market remain unchanged, largely because “people still need a roof over their heads”, according to Rob Weaver, director of investments at property crowdfunding platform Property Partner.
He commented: “While people clearly delayed house purchases in the lead-up to the referendum, that backlog in transactions should unwind through the second half of the year. Life decisions like moving house can’t be put on hold forever.”
Weaver points out that during periods of volatility in the stock and currency markets, investors tend to prefer assets which can provide a reliable income, combined with lower risk to preserve their wealth. “For investors, residential property offers both of these attributes”.
He added: “Historically, residential property has been the best performing and lowest risk of all the major asset classes. Since 1973, through oil shocks, recessions, dotcom bubbles and the global financial crisis, the UK residential market has seen no five-year period with negative total returns.”