Home sweet home?
The housing market was already expected to slow going into the summer. In the immediate aftermath of the of EU referendum, however, fears about the UK housing market intensified.
There is a huge amount of uncertainty around the UK economic outlook following the Brexit vote and a bewildering array of conflicting survey evidence on how the UK is faring. One of the crucial areas is the notoriously difficult-to-forecast UK housing market. We had expected some slowdown anyway this year. This was due to an increase in stamp duty in April which makes buy-to-let investing less attractive. The surprise EU referendum result and subsequent confidence shock risked turning the downward momentum into a slump.
But this week there is some cause for cautious optimism.
The Royal Institute of Chartered Surveyors (RICS) has published its monthly survey for July. Although the headline house price index fell to a three-year low, some of the details are encouraging.
New buyer enquiries - which have a good relationship with mortgage approvals - improved in July, which comes as a positive surprise. And many agents report that after an initial stall, activity is already picking up again (when adjusted for the usual seasonal effect of summer holidays). In addition, new instructions continue to decline which suggests not only is there no panic selling, there is still a shortage of stock.
Since the survey was carried out the Bank of England has cut interest rates and unveiled a package of measures. These actions are already feeding through to lower mortgage rates and should help support housing demand.
So overall, it is still too early to tell if housing activity has bottomed, but things are not looking as dire as feared. If house prices do not fall, then perhaps the consumer can continue to spend and the UK can avoid a Brexit-induced recession.