The Council of Mortgage Lenders says the Brexit vote will hit transactions as buyers and sellers wait for the dust to settle, but “we do not expect significant house price falls.”
The forecast came as the organisation released figures showing that gross mortgage lending reached £18.2 billion in May - some 4.0 per cent higher than the month before and 14 per cent higher than May 2015. This latest figure was the highest for any May since 2008 when gross lending reached £23.7 billion.
However, the significance of the rise was overtaken by concern over what the Brexit vote would mean.
“As expected, lending continued to be somewhat dampened in May, reflecting the earlier rush in the first quarter to beat the stamp duty change on second properties” says CML senior economist Mohammad Jamei.
“Looking ahead, there is likely to be considerable uncertainty as a result of the referendum decision. We expect this to affect sentiment and reduce activity below levels that would otherwise be expected in the near term, as both buyers and sellers adopt a wait-and-see attitude until the dust begins to settle” he says.
Jamei says the downturn in transactions may not be dramatic but may well be protracted. “here will be particular uncertainty in the prime London market, where a higher proportion of buyers are foreigners, who may delay their purchase to assess the impact of the referendum result” Jamei says.
However, he adds: “Market fundamentals underpinning house prices still look sound, and we do not expect significant house price falls, especially given the current supply demand imbalance.”
He says this imbalance has helped support house price growth over the last few years, especially as new supply of housing remains well below prospective housing needs.
“As a result, we have seen affordability becoming progressively more stretched, both amongst first-time buyers and home movers. This is not surprising when looking at house price inflation compared to wage growth. House price inflation has been outpacing earnings for 41 months now.”