Thursday, 14 July 2016
Brexit uncertainty hits activity in the Scottish housing market
Uncertainty fuelled by the EU Referendum, coupled with the higher stamp duty now in place on investment property purchases, has resulted in a marked drop in activity in the Scottish housing market, according to the RICS UK Residential Market Survey, June 2016.
New buyer enquiries declined significantly across Scotland during June, with 21% more chartered surveyors reporting a fall in interest – this sharpest decline since 2012. The drop in demand was witnessed right across the UK, with the south of England the hardest hit. Anecdotal evidence suggests both the EU referendum result and the tax changes are having an impact on sentiment.
In June, there was also a further fall in the supply of properties coming on to the Scottish housing market, highlighting the continued challenge presented by the lack of stock. Throughout the UK, 45% more chartered surveyors saw a fall in new instructions in June, following a net balance of -31% in May. This is the steepest fall on record.
The market has also seen a further decline in sales with a second successive monthly drop in activity across Scotland. Contributors expect this trend to continue with 9% more respondents anticipating a further drop in sales across the Scotland over the next three months; this is the first time the sales expectations series for Scotland has turned negative since January 2013.
Looking further ahead, sales are now projected to fall over the next 12 months across UK. Indeed, 12% more contributors expect transactions to fall rather than rise, the weakest reading over the past four years.
Although Scottish house prices continue to rise for the time being, short term expectations have turned downbeat, with a net balance of 23% more respondents predicting a drop in house prices over the next three months.
The picture for near term price expectations are now in negative territory across the whole of the UK, with 27% more respondents expecting to see prices fall rather than rise over the next three months. Rent expectations over the same time horizon remain more resilient and are still broadly consistent with an increase of just over 20%.
RICS chief economist Simon Rubinsohn commented: “Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity. However, eve n without the build up to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year following the rush in many parts of the country from buy to let investors to secure purchases ahead of the tax changes.
RICS data does suggest that the softer tone to the market will persist over the coming months but the critical influence looking further is how the economy performs in the wake of the uncertainty trigger by the vote to leave. Respondents to the survey are understandably cautious but with interest rates heading lower and sterling significantly so, it remains to be seen whether the concerns about a possible stalling in both corporate investment and recruitment are justified’’
Eric Curran FRICS from DM Hall LLP Glasgow commented: “Uncertainty, confusion and confidence issues have increased on the back of Brexit but there still remains a limited supply of property in many locations. Brexit may prevent overheating of the more desirable locations.”