Brexit and political uncertainty continues to stifle the UK housing market

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A house decorated with flags in Chelsea, London
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Reuters / Hannah McKay

LONDON – House price growth continued its slowdown in June, according to the latest residential housing survey from the Royal Institute of Chartered Surveyors.

The group’s UK Residential Market Survey, regarded as the best lead indicator for house prices, found the net balance of surveyors predicting price rises fell to +7% in June, down from +17% in May.

That represents the softest reading since last July, the month immediately following the EU referendum. Prices are still predicted to grow, but at a slower rate than previously thought.

44% of respondents nationally said domestic political uncertainty is the biggest factor explaining the current state of the market. That compares to 27% who highlighted Brexit as the most important factor influencing the picture.

Data is already pointing to a slowdown in property price rises. Official Land Registry data shows that annual house price growth in the UK was 5.6% in June, down from 8% this time last year.

RICS respondents recorded a further decline in newly-agreed sales to -5%. The net balance of new instructions to sell houses fell sharply to -19%. RICS said the decline reflects a lack of stock coming to the market and a more cautious stance from buyers in recent months.

Regional variation

The survey found the loss of momentum is not reflected in all parts of the country, with London – largely picking up big price declines in the expensive prime market – recording the most negative net balance:Screen Shot 2017 07 12 at 14.08.59

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RICS

Respondents in London reported a net balance of -45% for price declines. In Northern Ireland, 41% more surveyors saw a rise in prices rather than a fall, while in Wales 38% more respondents measured a rise than a fall.

Simon Rubinsohn, RICS Chief Economist, said the results indicate the problem of understanding the UK housing market as a single entity. He said:

“The latest results demonstrate the danger, however tempting, of talking about a single housing market across the country. RICS indicators… are pointing towards an increasingly divergent picture.”

“High-end prime properties may be seeing prices slipping back but, for good or ill, prices are continuing to move higher in many other segments of the market.”

“Perhaps not surprisingly in the current environment, the term ‘uncertainty’ is featuring more heavily in the feedback we are receiving from professionals working in the sector. This seems to be exerting itself on transaction levels which are flatlining and may continue to do so for a while particularly given ongoing challenge presented by the low level of stock on the market.”

No election impact

Lucian Cook, Savills head of residential research, told Business Insider: “The results continue to point to weaker house price growth and transaction levels right across the country given the backdrop of increased political and economic uncertainty.”

“Perhaps surprisingly, the general election seems to have had no significant impact on prevailing sentiment, which probably reflects the ongoing mood pre-election,” he said.

“As we forecast, the London market is slowing and that is beginning to filter through to surrounding locations. By contrast, a stronger market is being seen further afield, for example in the Midlands, reflecting the stage in the market cycle.”