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Property Shares Rebound After EU Referendum

Agency and property shares have rebounded strongly following their collapse after the UK voted to leave the EU, with some making marginal gains in the past two days. This suggests that stability is returning to the market after the Brexit-induced panic.

House Prices Stalled Pre-Referendum, Ushering in the Collapse after Vote to Leave

After the Brexit vote on Friday, lots of investors and homebuyers that were on the verge of sealing their house deals pulled out.  House buyers were uncertain about the direction of the property market, while some had fears of what Brexit would mean for their jobs and businesses.

The property market slowed down significantly prior to the vote as investors waited for the outcome, fuelling fears that the British property market would nosedive if the British people voted to leave the UK. This was confirmed by Lucian Cooks, head of property research at Savills, who said that uncertainty pre-referendum impacted adversely on enquiries from new buyers. Mr. Cook also said that the uncertainty was likely to pull back price growth and decrease house transactions.

Housing Sector and Sectors Were Affected by Brexit

It wasn’t only the housing market that took a hit. The pounds at one point on Friday, immediately after the vote to leave on Thursday, fell to a 30 years low against the dollar. The FTSE 100 lost about 140 billion at a point on Friday. Globally, the picture wasn’t any different. About 2.1 trillion dollars was wiped off the value of the world’s economy.

House Deals Fell Apart fuelling Housing Market Crash

Agents were reeling as deals were falling apart after Brexit. A lot of investors took advantage of the Brexit clause most agents added to their agreement that would allow them pull out if Britain voted to leave.

A lot of Housing stocks were down on Monday this week. Countrywide shares fell by 55 points, losing about 20% of its value at one point. Hybrid agencies were not spared with Purplebricks losing about 15% of its value, about 25 points; while Foxtons closed the day 30.5 points or 22% down after issuing a profit warning.

Just as steep as the fall was, the recovery in the last two days has been remarkable.

Housing Market Rebound

There was only minor volatility in the market on Wednesday and most firm holdings either remained stable or narrowly improved.

For example, Savills closed at 608.00, representing a 4.47% increase while Foxton rallied and closed at 105.50, a 0.96% rise.  LSL Property Services rallied and added 5.0% to its value closing at 225.00 at the end of Wednesday. Countrywide stocks remained stable over the day, closing at 250.0.

Hybrid agency, Purplebricks, after falling significantly on Monday, didn’t just rally back, but it also added 0.50% to its value, closing at 129.00.

Online property portals Zoopla and Rightmove were not left behind. Zoopla gained 8.2% to close at 264.00, while Rightmove closed 3,648.00, representing an 8.4% increase in value.

Also, Housebuilders, which suffered massive losses on Monday, gained momentum and rose narrowly.

Foreign Investors Driving the Rise of the Property Market

A lot of the upward momentum the real estate market has gained in the past two days is linked to the influx of oversea buyers. Foreign investors are increasingly confident of getting a good deal because properties are a lot cheaper following the economic downturn due to Brexit.

Also, investors paying in other currencies are also paying cheaper because of the drop in the value of pounds.

According to a London real estate agent, Stirling Ackroyd, buyers paying in Euro saved about £42,000 (€50,900) on average on house purchase in London following the vote to leave the EU that weakened the pounds.

While the majority of local buyers were pulling out of house deals due to the referendum results, oversea buyers were picking up the houses at discounted price.

UK estate agents say that they have been receiving lots of calls from Chinese, Spanish, Italian and Middle Eastern buyers looking to take advantage of the favourable exchange rate to find bargain buy in the UK.

For instance, Guy Gittins, sales director at Chestertons, a firm that specializes in international property, said the head of property from a Middle Eastern bank asked their firm to prepare a list of properties for clients who would arrive after Ramadan.

Within 48 hours of the vote to leave, Simon Barry, Harrods Estate’s head of development, also reports that they had a lot of enquiries from clients in the USA, Middle East and Africa looking to pick up properties from the London property market at bargain prices.

Mr. Barry said that the sharp decline of the price of the sterling would be seen by investors around the world as a buying opportunity.

The founder and chief executive of UK’s hybrid estate agency, eMoov.co.uk, said that the fear that the UK property market will “fall of the face of the earth” if the UK voted to leave the EU has not materialized.

Domestic Buyers Pulling Out

Galliard Homes, the second largest house builder in London, said that a local buyer that had a contract to purchase 89 housing unit in Slough exercised the get-out clause in the contract designed to protect investors if UK voted to leave. However, they said a foreign professional investor picked up the deal.

Also, with the future of foreign banks operating in London uncertain following the vote to leave, some employees of those banks have been pulling out of deals to buy home.

These are just some examples that show that local buyers prefer to play it safe because of the uncertainty created by Brexit.

According to a survey of 1000 UK nationals by a home improvement site, 23% of homeowners between the age of 18 and 24 years said that they were less likely to sell their homes in the next 3 years.  The survey further revealed that 12 percent of the 1.7 million British homeowners were unlikely to move in the next 3 years.

Some British Buyers Still Buying

Some British buyers looking to buy a house as permanent residence for their families are indifferent about the uncertainty created by Brexit. Local buyers looking at long-term gain are not concerned about the impact of Brexit and are going ahead with their deals.

It will take some time to understand the overall direction of the British property market. But it seems for now that the market might not do as poorly as was earlier feared.

Thanks to The House shop