Before the European Referendum vote earlier this year, the Conveyancing Association issued a note of caution, predicting that a vote for leave would create uncertainty in the housing market and lead to a period of nervousness.
Chairman Eddie Goldsmith said that the Association members – conveyancers and solicitors responsible for 20% of all the residential property transactions in England and Wales – overwhelmingly supported remaining in the EU. Borrowers who were looking to make the biggest financial decisions of their lives wanted to see and feel that nothing is likely to risk their jobs or increase their mortgage payments.
“There is likely to be a period of nervousness in the housing/mortgage markets which could last for a couple of months,” he said. “We could see a reduction in housing transaction numbers until consumers and borrowers are more certain of what the position is.”
Solicitor Liz Seal, a partner heading up the residential conveyancing team at Plymouth-based law firm Curtis Whiteford Crocker, has already noticed that it is quieter in the property world under the shadow of Brexit.
“There is normally a lull in summer, but things tend to pick up a bit in September,” she says. “It was quite busy earlier in the year with people bringing forward their property purchases because of the higher rate of stamp duty which came into force on April 1.
“Generally speaking, it has been quite steady for the last few years although our conveyancing work does tend to go in cycles. On a Friday or the last day of the month are always busy for completions, or if there’s a bank holiday. And people always want to get in by Christmas every year. Spring is also traditionally a busy time for us.”
Eddie Goldsmith of the Conveyancing Association warned that, with the ball being in the buyer’s court, some hard negotiation on prices could result in a short-term fall. Liz Seal certainly thinks Brexit could influence prices in the Westcountry.
“I think we’re probably going to be affected in the same way any other part of the country is. The least affected area seems to be around London. There’s been no decrease in property prices at all. In fact they’ve increased. We were told that, during the recession, prices dropped by 20%. They never went down at all in the London area.
“It makes it difficult for people looking for property in the Westcountry,” says Liz. “People come out of London and they are prepared to pay quite high prices, which artificially pushes up prices here.
“In terms of commercial property, deals are still going through. At a domestic level, uncertainty is the problem. The housing market is affected by any changes in the economic climate.”
The property market is also likely to be affected by changes to the treatment of loan interest for tax purposes on rental income, due to come into effect in April 2017.
“The changes will be phased in over a number of years,” says Liz. “But it does mean that private landlords will look at putting up rents to maintain their rental income because they will be paying more tax.
“The government seems to have a plan to penalise private landlords while not investing heavily in the social housing sector where demand is always greater than supply.
“In this area, a lot of people are quite small investors, investing in property rather than putting their money into a pension fund. It seems that the additional property tax is specifically to discourage landlords from buying second properties.”
Brexit, new legislation and the prospect of parliamentary elections in the future all have an impact on the property market.
“What effect this things will have, it’s too early to say. It has been quieter, but we might not see the impact of any changes straight away.”