A vote to leave Europe would have very little effect on the UK housing market, Capital Economics has said.
The economic consultancy says a vote for Brexit is unlikely to trigger a collapse in the housing market or the general economy.
However, it cautions that the period before the referendum itself could cause uncertainty because firms and consumers might defer major spending decisions.
Agents Savills and Countrywide have largely voiced the same opinion – that uncertainty in the run-up to the referendum might slow the market.
Capital Economics does query: “With housing already looking very expensive, could even a brief rise in uncertainty and volatility tip it over the edge?”
However, it goes on: “Altogether, uncertainty in the short term might lead to a small drop in transactions and a slight easing in house price growth.
“But we think the prospect of Brexit driving a collapse in prices is slim.
“Rather, with prices very high compared to incomes, and being propped up by a shortage of homes for sale, a recession and rising unemployment that drove up the number of forced sellers and cooled buyer demand is probably the biggest risk.”
The consultancy says that a Brexit would not affect sales of properties to overseas buyers, who see London “as a safe haven due to its robust legal system, favourable property laws, stable governance and cultural draws”.
Capital Economics does, however, say that a Brexit would hit house building hard, because of the number of construction workers born outside the UK. Separately, Tony Pidgley of Berkeley Group has said that half his subcontractors are from Eastern Europe.
The think tank says there are few signs of a looming recession. Instead it says wages are likely to rise, mirroring house price increases.
* There is a current discussion by readers about the referendum on the Arena section of our site.
Those of us with interests in Scotland may disagree. A vote to leave the EU will very likely prompt another vote for independence according to the First Minister. Additionally, I may be being thick here, but surely house building being hit hard will have some negative impact on the market and reduce supply inevitably increasing prices and perhaps adding to a potential bubble…
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The property market needs fundamentally good news (or no news, if you see what I mean) to move forward. Elections, Referendums, changes in pensions, stamp duty changes, interest rate moves, etc,etc. All have a negative impact. Fundamentally we have
Low unemployment
Low interest rates
But we also have excessive house prices in London and other hot spots plus all the other market influences as mentioned above. Therefore you can expect little market activity for the next three months and it could stay like it is till the end of this year.
If there is a surge of property for sale in London then you can expect house prices cooling off because there prices are becoming unrealistic. I could be wrong, but fence sitting becomes the new normal in uncertain times.
Where I am in the Welsh Boarders we are struggling to generate new instructions with many vendors just simply not doing anything. Most have no mortgage or retired and can and will fence sit I expect now till after the summer.
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This maybe the closest thing to anything positive that Capital Economics has every said about property. Up until now they have been the experts of choice for sites like mypropertycrash based upon their negative sentiment towards the housing sector. Well, well, every day is a school day.
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Behavioural Economist, Roger Martin-Fagg, has just released his overview on what the facts are around Brexit, and his opinion… You can read the full report here http://propertyacademy.co.uk/eu-referendum-2016
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Roger Martin-Fagg has many wise words. It is an excellent article but does not go as far as to say that there will be no market adjustment. I personally believe that there is a very, very real prospect of a serious market correction if we leave the EU, principally as a result of the uncertainty that will be caused.
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