Post EU Referendum implications for UK residential market

First comments from Lucian Cook, Savills UK head of residential research says:

“With the results just in, it is impossible to predict what will happen to the UK housing market with any great accuracy until we know what Brexit will mean for the wider economy.  What we do know from lead indicators, such as the RICS survey, is that uncertainty pre-referendum impacted on new buyer enquires. A continuation of that uncertainty is likely to pull back price growth and transactions in the short term.

“The prospect of an increase in mortgage interest rates and a reduction in wage growth is expected to create greater affordability pressures over the medium term, particularly in London where borrowers have stretched themselves further. However the precise impact depends on how severely these affordability drivers are affected.  An increase in effective interest rates will also have heightened relevance for mortgaged buy to let investors, given the progressive reduction in tax relief they will get on their mortgage payments in the future. Nonetheless the inherent undersupply of housing in the UK should continue to underpin the market.

“The prime markets, that typically are more volatile, may well see a greater short term impact.  However, along the line, a fall in the value of sterling should bring some international buyers back into the market, albeit with potentially less gusto than in previous downturns given higher stamp duty costs.”

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BDC 305 Jun 2023