In addition to post-Brexit instability, inflated asking prices are causing the residential housing market to stall, with homeowners wrestling with the accompanying uncertainty.
Recent research by The Times suggested that the average time it takes to sell a house is now nearly ten months. Coupled with this, estate agents predict that the number of transactions likely to be completed in 2017 will fall by 11%.
According to the property search website home.co.uk, a detached home in London stayed on the market for 20% longer on average in February 2017 compared to February 2016.
Market commentators believe that a combination of increasing property prices, concerns about the state of the economy and more stringent lending requirements, including changes in stamp duty land tax, have all played a part in slowing down the housing market.
Cities in Southern England, including London, Oxford and Bristol, are worst affected by the slowdown in market activity, according to The Times, with fewer homes consequently being available to first-time buyers.
Savills, in its Residential Property Focus, predicted that sales to buy-to-let buyers will fall by 33% in 2018, with sales to first-time buyers and other home movers with a mortgage falling by 15% and 10% respectively.
The Times also observed that much of the overinflated house pricing may be down to “unscrupulous” estate agents, who are under pressure to get in new stock.
As a result, many sellers are being forced to cut asking prices in order to sell their homes.
According to property market analysts Propcision, 28% of properties listed in London were discounted. This figure was 26% in Manchester and 19% in Birmingham.
Indeed, the latest house price index from Halifax indicated a slowdown in the annual rate of growth from 5.7% in January to 5.1% in February 2017 – the lowest since July 2013.
Halifax housing economist, Martin Ellis, stated that: “A sustained period of house price growth in excess of pay rises has made it increasingly difficult for many to purchase a home”.
Lucian Cook, director of residential research at Savills, also noted that: “Transactions would not increase until 2019, once Brexit talks are under way”.
Despite this fairly gloomy outlook, the UK’s total trade deficit actually narrowed from October 2016 to January 2017; confusing the impact of Brexit on the UK economy. However, market commentators were quick to point out that this is largely due to a rise in sales of gold from the UK to countries such as China. In the final three months of 2016, exports to Switzerland, where the gold is recast before being shipped to China, were at their highest ever level.
Movements in the trade of gold can have a very distorting effect on domestic GDP figures, so it is important to be wary of these trade deficit figures when analysing the impact on the real economy.
Meanwhile, the real estate sector remains in uncertain territory as it looks forward to the conclusion of this volatile period.