On the morning of 24 June, as Britain woke up to the reality that as a nation we’d voted to leave the EU, it may have seemed like the world was turning on its head. The pound was crashing, stock markets see-sawed, and the political landscape of the UK was irrevocably changed.
Just over a month on, however, and we already have a pragmatic and steely new Prime Minister in Theresa May, Philip Hammond – a former property developer – is her chancellor, and the Bank of England has poured liberal amounts of oil over troubled waters, with strong hints that there is more to come. Even Boris has bounced back as the new foreign secretary tasked with selling post-Brexit Britain to the world at large.
Something else that has proved remarkably resilient is the residential property market, especially in London. While jitters have been felt in the financial services and, by extension, commercial property sectors, the panicked stampede for the exit from residential markets is yet to materialise.
Understandably, a small number of deals fell through in the immediate aftermath of the result. But new suitors quickly emerged, and any cooling interest from domestic buyers or buy-to-let investors has been mitigated by increased interest from overseas, primarily buyers in the dollar but a fair number from Europe as well. Some sellers have accepted offers they may have rejected before 23 June, but in many cases offers are still being made and accepted at or even above the asking price. Price, presentation and position remain the watchwords when selling a home, and in London demand still far outstrips supply.
What has been frustrating is some of the negative reporting on the residential property market outlook since the Brexit result came in, which in some cases has bordered on hysterical.
Just a week after the vote, one newspaper carried a poorly researched piece on its front page warning of panicked sellers “slashing” prices. On closer inspection, the properties flagged as prime examples of this discounting frenzy had in fact been reduced incrementally over timespans of a year or more, with the majority of the discounts coming before the referendum. Perhaps unsurprisingly, the so-called experts quoted in the piece were mainly buying agents, who would presumably be very happy to secure discounts for clients if spooked sellers were indeed rushing to “slash” prices.
Then we read that a leading French bank’s chief real estate analyst had briefed clients to expect high-end London house prices to fall by between 30 per cent and 50 per cent on Brexit by 2020, compared to how they would have performed over the same four-year period if the UK had voted Remain. Such dire predictions are yet to be echoed by any of the major UK-based agencies and analysts, yet the headline-grabbing statement was carried – largely uncritically – by a host of major UK media outlets.
Read more: What Brexit? House prices inched up in July
Once more, the doom-mongers’ ulterior motives demand scrutiny. Do they stand to benefit by sparking a panic in London residential markets, which would simply make property here even more affordable for non-sterling buyers? Or do they hope global investors will think twice about investing in London and opt instead for Paris? RICS surveyors have also joined in the doom-mongering, with a survey of members indicating most thought that prices may flatten and that price inflation may be reduced – but it’s important to remember this was a qualitative not a quantitative survey, and really only expressed sentiment.
London agents know their business and, in the main, are yet to see any significant adverse fall-out from the Brexit vote. Some may sneer that estate agents would hardly be expected to talk down the market, but most quality London agents are cautiously optimistic, or at least point out that it is simply too soon to make accurate forecasts. Most have revised their mid-term growth figures to price in Brexit and the negotiations that lie ahead, but few if any are predicting a crash.
With our new chancellor renowned as a “safe pair of hands”, and a remarkably measured approach to maintaining liquidity in housing markets from the Bank of England, it is to be hoped that we won’t see a return of the dark days of the last global financial crisis. London residential property – as it has for centuries – still represents a sound investment over the medium to long term, offering returns of around 8-12 per cent over the next five years.