How has the Brexit vote affected the property industry?
It’s been over a month since the EU referendum took place and the British public voted to leave the economic bloc. While the future of the economy and the full impact of Brexit is still unknown, trends are beginning to emerge that show how the vote has impacted the property industry and how it could develop in the future.
The looming threat of Brexit on the property market was already causing ripples for real estate agents and other firms in the sector before the vote even took place. There were multiple reports that both first-time buyers and existing homeowners on the move were deferring their decisions to purchase a property until after the results came out. This led to profits falling for some businesses and meant the number of completions dipped. Estate agents Foxtons saw their share price fall after issuing a profit warning stating full-year earnings would be ‘significantly lower’ with the effects of the referendum expected to be felt for at least the rest of 2016.
The luxury property market in London has also taken a hit following the vote. Some firms have seen millions wiped off their development’s value in the last month and it could fall further in the coming weeks.
The commercial property sector has been impacted by Brexit too. According to the Royal Institution of Chartered Surveyors, enquiries for commercial property investment slumped by 16% in the second quarter of 2016. The lack of interest within this area could signal challenges ahead for property professionals as competition is likely to increase. Standing out from the crowd will become ever more important.
However, there are positive signs emerging that the property market is picking back up after the vote and will continue to do so. While in June home purchases were below levels seen in 2015, mortgage lending is rising, indicating that purchases should begin to rise again in the coming months, albeit at a slower pace.
In total, buyers have borrowed £8.4 billion, a 3.5% increase, to buy over 48,000 homes. A rise in terms of finance but not in terms of volumes, suggests houses are more expensive. However, with interest rates already low there isn’t much scope for mortgage rates to decline further and drive up additional interest.
The remaining uncertainty and fragile recovery means those working within the property industry are likely to face obstacles as they try to continue to grow their business and gain new opportunities.
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