Home buyers shrug off Brexit as UK market remains buoyant

Bloomberg

Steve Victor pulled out of buying his first home the day after Britain voted to leave the European Union. Just a month later, the IT contractor dived back into the market to become the owner of a penthouse apartment in London.
“I bailed on the initial shock, but after it sank in I came to the conclusion I had to take the plunge at some point,” the 34-year-old said by phone. “Despite my fears, prices have already risen where I bought.” Victor’s experience shows how some buyers have regained confidence in the UK real estate market following the Brexit referendum on June 23. While London house prices fell after the vote, they rose across the country as a whole — just not as quickly as before.
Now that the government has triggered the EU exit mechanism, home buyers will be anxious to see whether the market and the wider economy remain buoyant or succumb to the doom-and-gloom predictions of figures including former Chancellor of the Exchequer George Osborne.
“The impact has been much more muted in the mainstream market than we anticipated,” said Lucian Cook, research director at London-based broker Savills Plc. “The triggering of Article 50 itself has been factored in by buyers and the housing market has stood up because there’s been no discernible impact on the economy.”
Helped by record-low mortgage rates, home values across the UK climbed 6.2 percent in the 12 months to January, 1.6 percentage points down from their increase a year earlier, government data show. Osborne — who campaigned for a “remain” result — had warned of a significant drop, claiming before the referendum that prices would be 10 percent to 18 percent lower following a Brexit vote than after a decision to stay in the EU. Patrick Duce, a 32-year-old NGO worker who exchanged contracts on a north London apartment the day before the referendum, said that as a first-time buyer he wanted to press ahead regardless of whether Britain would be in or out of the EU.
“With hindsight, the vote didn’t make as much difference as I feared,” said Duce. “If there is going to be any significant impact on the housing market as a result of Brexit, it is now clear it will take so long to come through, my desire to get on the ladder means I wouldn’t have delayed more than a few months.”
Research company Capital Economics Ltd. was pessimistic about UK real estate in the wake of the decision to quit the EU, cutting its forecast for home sales by 10 percent. In fact, sales held steady from July to November at about 97,000 units a month, some 10,000 a month less than the same period in 2015, and climbed to about 104,000 in February, government data show. Capital Economics now sees volumes increasing “gently” over the rest of this year, said property specialist Hansen Lu.
Brexit is actually helping the luxury end of the market as the weaker pound and uncertainty over the terms of the divorce make prices more realistic, according to Roarie Scarisbrick, a partner at Property Vision Ltd.
London was more affected by the Brexit vote than the UK as a whole, with prices in the best districts dropping 6.6 percent in the year through February, according to broker Knight Frank.
London’s residential property market is in a state of flux. Falling sales and
values for luxury properties in the center of the capital mean annual house-price indexes are more dependent on transactions in the outer suburbs, where values are still rising. On a month-
on-month basis, prices have fallen for most of the past year following a stamp-duty rise for investors and second-home buyers and worries about the economic impact of Brexit.