Buyer’s regret was a Brexit buzz phrase and house buyers are a critical element in what happens next.
Mood and sentiment drove the referendum and they will be the drivers of what happens to the housing market. If buyers sit tight for a long period, that creates significant risks.
The key factors are interest rates and supply but as a yardstick, we can look to the 2008 financial crisis for pointers. New buyers and small-scale investors are they key movers in the market. If they decide to sit it out, they will create a drop in pressure that may say is needed in an over-heated market.
After 2008, prices did not fall significantly – and have registered massive growth since the recovery got under way.
Eight years’ on, the UK has still not built enough homes to meet demand. So there are still more buyers chasing fewer homes. And people will always need to move because of life’s big three events: births, deaths and divorce.
Investor pressure is on private sector builders and already there are warnings that they may reduce costs by building fewer homes.
Barratt, the biggest of the private builders, has already signalled it could slow new construction.
Barratt chief executive David Thomas told Reuters: “We would look at future land commitments, our current commitments, we would also look at our build programmes and the extent to which we should slow down our build programmes.”
His statement to the City said: “Following the EU referendum, it is too early to say what the impact of the uncertainty facing the UK economy will be. The sector continues to receive focused government support, mortgage availability is good and there remains an undersupply of new homes.”
Estate agents are among the casualties in recessions. Their industry is currently undergoing significant change driven by the challenge from online sales businesses.
One of those contenders, HouseSimple.com, revealed a 7% fall in the supply of properties for sale coming onto the market in June.
Chief executive Alex Gosling, said: “Fear and uncertainty over the Brexit vote definitely had an impact on buyer and seller confidence in June, with many sellers holding off putting their properties on the market until the result was known. Now we know, and although the decision has come as a bit of a shock, at least a degree of uncertainty has been taken out of the equation.
“The property market can now roll up its sleeves and get on with it. Nothing has fundamentally changed overnight and people still need to buy and sell homes whatever the market conditions. We still have a supply shortage, and this may well counter any fallout from Brexit.”
There has always been a regional disparity to the UK housing market. Regeneration and inward investment have been the key drivers to price rises and new developments. This has mattered most for Northern Ireland which has high levels of deprivation.
A possible cut in corporation tax could sway investors who are currently reviewing their plans.
Ryan Andrews, a director of Reeds Rains in Northern Ireland, said: “I do think things are going to continue to improve and I don’t think Brexit will have any long-term negative impact. You may have people putting off signing up to a 25-year mortgage and renting for a few years while waiting to see how things pan out.
“I think a competitive reduction in corporation tax will increase jobs. You’re more likely to get companies wanting to invest here and especially the likes of the IT companies that tend to have short contracts, their employees will be looking for short term lets.”