One thing I can guarantee is if people are told ‘house prices are expected to fall’ then they surely will!
So it’s important to be clear on exactly what press releases and ‘experts’ are saying as some of the interpretations aren't correct, which could end up triggering a fall in property prices, potentially unnecessarily!
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RICS UK Residential Market Survey
What they have actually said is:
Buyer enquiries have fallen for the third month in a row – this was expected prior to the Brexit vote and was partly due to a normal market slowdown post the ‘rush’ to buy after the recession
Agreed sales have fallen ‘sharply’ and they often do during the summer, but as above were also expected to do so
The third one is critical to understand:
“Medium term price expectations slip, but remain positive, with rent expectations still firm”
So RICS are NOT SAYING prices will fall across the country. The exception is London, where they point out:
"London remains the only region in the UK where respondents are seeing prices fall"
But remember, this is after they have grown by up to a staggering 60% since the height of the market prior to the credit crunch.
What RICS are effectively saying is that even before the Brexit vote, the market was predicted to slow down and that post the Brexit vote, the slowdown is showing to be sharper than expected.
But with many property prices growing year on year by 5-15% at the moment (double digits mostly in London and the South) a slowdown means:
Prices may flatten
Price inflation maybe reduced
It does not mean prices may fall.
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Who else agrees? Savills research team
And they are not alone in saying this. Savills have just produced their assessment of the impact of the Brexit vote on the property market.
In summary they are saying:
“Caution is likely to affect sales in the housing market but low interest rates will underpin prices”
They have also produced a super chart to explain the potential impact of the Brexit vote on the property market:
Their conclusions are:
Downside risk to the housing market are not as harsh as the 2008 financial crisis
Political and economic uncertainty will slow transactions and reduce price inflation in the short term
Lenders may tighten criteria for higher loan to values eg first-time buyers and second steppers (due to risk of house price inflation slowing)
The number of properties sold will fall back, but not by the 50% they did during the credit crunch
London will be hit the most due to affordability being stretched and previous high house price inflation.
Overall, house prices are only likely to see real falls if the market is ‘weak’ ie demand and supply matching.
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