The only certainty is uncertainty. So what next for t...

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24 June 2016

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The only certainty is uncertainty. So what next for the industry?

One estate agency leader - you’d all recognise his name - described the victory of the Leave camp in the referendum as “handing the country over to Dad’s Army.”

He berated the narrow majority of voters, the minority of politicians and handful of agents who wanted to leave. But like everyone else he must now get on with it.

So what next?

Firstly, some fundamentals remain. “Britain is a market with an affluent customer base and a highly educated and talented pool for employment. We have a set of basic needs and investors will hunt out companies with a good yield track record come good times or bad; this goes for property too” explains Alex Newall, director of high-end agency Hanover Private Office. In other words, over time, people will still buy and sell, let and rent.

Those words are easy but, away from the eye of the storm that blew up within minutes of the result becoming clear, the process of changing Britain’s market - it’s whole market - will take some time. This gives the property world some years to fully adjust and allows Alex Newall’s views to gain ground.

So secondly, between now and when the UK leaves, there will still be significant immigration into Britain from within the EU. The most die-hard Leavers will have to live with that, because they themselves want a relatively slow transition process and until that is concluded there will be EU-style open borders for remaining EU countries.

That is good news not only for Britain’s construction industry but also for the lettings sector - a sector very heavily benefitting from inward migration from the EU in recent years.

In addition, it is likely that Britain’s continual reliance on inward migration from outside the EU will probably increase in volume over time, given Britain’s reduced ties with Europe. That is more reassurance for the private rental sector, agents and landlords.

Thirdly, the Article 50 process - the bureaucratic name for the period of withdrawal - will not begin until David Cameron’s successor is named. The process then takes two years.

This gives some time for agents to understand the internal factors that will change - new money laundering, new consumer legislation, new competition laws, environmental regulations and a lot more.

What is less predictable is what will happen with the market for both sales and lettings.

To say industry figures have been overwhelmingly pessimistic about the result is a simple truth. Those figures are particularly worried by the short term, and that pessimism stretches across many sectors.

“It is hard to see any good side of the Brexit result in the near term except that the fall in Sterling will give any overseas buyer a window of opportunity to buy cheaply. The most likely scenario is one that we have seen before in other times of dislocation - 1987, 1998 and 2008 - a period where the market seizes up and the only activity is between the brave and the desperate” says Charlie Ellingworth of the buying agency Property Vision.

“A Vote for Leave unfortunately creates uncertainty because the eventual result of the negotiations, and the UK’s economic position in this new world, are (at the moment) unknowable. There is therefore likely to be a period of nervousness in the housing/mortgage markets which could last for a number of months – for instance, we could see a reduction in housing transaction numbers until consumers/borrowers are more certain of what the position is” says Eddie Goldsmith, chairman of the Conveyancing Association.

“Whatever result you were hoping for, it’s hard to argue against the fact that this result will bring further uncertainty and also creates far more questions than it answers in terms of what happens next as Britain extricates itself from the continent in terms of procedures and processes” according to David Brown, CEO of Marsh & Parsons.

“The chances of a technical recession, as business investment is curtailed, is high, and exporters and financial services firms will be in the forefront of the downturn” argues James Roberts of Knight Frank.

“The vote to leave the EU presents the UK housing and mortgage market with a number of potential risks and challenges simply because of the uncertainty we are now faced with” admits Rob Clifford, chief executive of CENTURY 21 UK.

It goes on - and on, and on. I can show you the press releases from the high end, volume sector, suppliers, agents for sellers and agents for buyers. Short term problems are inevitable because of the scale of uncertainty, and maybe only the lettings sector has any confidence in the short term, for reasons set out earlier.

In the long term, there is much more optimism - we’re back to the fundamentals that people still need to buy and rent. It’s just that before getting to the long term, we’ve got to get through months, maybe years, of uncertainty.

And doesn’t everyone (even the relatively modest proportion of pro-Leave agents) feel uncertainty was a cause of trouble in the market in recent months...

*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn

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- Simon Shinerock
- 25 June 2016 10:12 AM
I'm not certain what all this uncertainty means! However, it's an ill wind that blows nobody any good and there are always winners. As the dust settles opportunities will become apparent I'm sure. One consequence of reduced volumes in the market may be to cause the premature demise of potential disrupters who may no longer have the legs for the race, this may indirectly benefit the establishment of it can adopt at least some of the new tools at its disposal, we shall see

- Mohammad Ashique Mallick
- 25 June 2016 10:13 AM
There must be impact on property sector and particular sales but it is too early to figure out the impact.

- Sophia Mose
- 25 June 2016 11:40 AM
Here in France the consequences have been immediate. Our clients with budgets in Sterling have all cancelled their searches. For Provence and the Côte d'Azur the blow will be less, as we have such an array of nationalities buying here, but for the southwest of France (Gers, Dordogne, Lot etc) the disappearance of British buyers will have a significant effect. However, prices will presumably adjust downwards and sellers returning to Sterling land will accept lower prices. This makes it likely that the effects will cancel each other out somewhat and transactions will increase in number again. Uncertainty is never good though.

- Duncan Pattinson
- 26 June 2016 13:36 PM
The gap between leave and remain is too close . We had a winner but we also had many people that now feel short changed. It is a fantastic opportunity for the leave vote to plan and execute a strategy that everyone will be pleased with.