Prolonged Brexit uncertainty will damage the Scottish housing market, says RICS

Simon Rubinsohn

The latest results from the February survey show a continued decline in activity across the UK housing market, with new buyer enquiries, agreed sales and instructions all falling.

This is the sixth consecutive month all have fallen together, and the headline price balance also slipped to its lowest reading since 2011. Significantly, in an additional question in the survey this month, over almost half of Scottish respondents (47 per cent) confirm Brexit uncertainty is holding back activity in the market, as buyers and sellers sit tight, resulting in near-term activity indicators pointing to further declines.

The RICS survey has long highlighted the impact Brexit uncertainty has had on the housing market, as stock levels hit all times lows, activity stalled, and sales took longer to complete. That said, in recent reports the twelve-month outlook has remained broadly positive, reflecting the hope that greater clarity will emerge after March 29 when the country was expected to leave the EU. However, following Theresa May’s latest Brexit deal defeat, regardless of whether the UK now leaves the EU with or without a deal, the impact of further uncertainty is expected to be felt across all tenures of the housing market.

During February, buyer demand in Scotland remained flat for the third consecutive month. The continued lack of stock appears to be holding back buyer demand, as respondents cited this another big challenge to the market in addition to Brexit. There is little sign of stock levels improving. This is the ninth consecutive month where respondents have reported a fall in the number of properties coming on to the market.

Respondents also reported a fall in the number of agreed sales last month, and -25 per cent of respondents expect sales to continue falling over the next three months. Looking further ahead, sentiment for sales remains subdued with respondents not expecting sales volumes to rise significantly over the coming twelve months across the UK.

Despite downcast sales activity, price expectations in Scotland remained modestly positive, with 9 per cent of Scottish respondents expecting a rise in house prices over the next three months. The only other area in the UK displaying positive price growth now is Northern Ireland, with the rest of the UK regions returning flat readings.

Simon Rubinsohn, RICS chief economist, said: “Although activity in the housing market continues to be weighed down by the lack of available stock, changes in the tax regime affecting property, and affordability; feedback to the latest RICS survey makes it pretty clear that the ongoing uncertainty around how Brexit will play out is the critical factor influencing both buyers and sellers. And with little sign that the issue will be resolved anytime soon, it could prove to be a challenging spring for the housing market and the wider economy.

“It is clear from professionals working in the market that this environment requires a greater degree of realism from those looking to move. A reluctance from some vendors to acknowledge the shift in the balance of power in the market will compound the difficulty in executing transactions.”

Hew Edgar, RICS interim head of policy, added: “It is clear from recent survey results that the wearisome state of British politics that have arisen from Brexit – particularly in the last six months – continue to take their toll on UK housing. Taking Brexit out the equation, there are clear issues that need to be tackled such as supply; a disputable SDLT framework; and a faltering PRS system. All of which have been overshadowed and have therefore not received the much-needed parliamentary discussion and debate.

“UK Parliamentarians must recognise that the prolonged uncertainty without effort to address separate key issues in the UK, is damaging confidence in the housing sector, and we share the resounding sentiment of frustration from our professionals.  Parliamentarians need to work together to ensure politics, the future deal and our relationship with the EU works for the built environment.”