PROPERTIES at the high end of the residential market are most likely to be hit by the impact of Brexit uncertainty, a leading analyst of the sector has warned.
It is also expected that overall transaction numbers will fall once the two-year exit process to leave the European Union is triggered as uncertainty stints market growth.
However, the fundamentals of the housing market – namely strong mortgage availability and a lack of housing – will ensure any overall impact is minimal.
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John Boyle, director of research and strategy at Edinburgh-based Rettie & Co, said the property market has been stabilising, but “the impact of Brexit is probably most likely to be keenly felt at the middle to upper reaches of the market”.
Mr Boyle said the higher the value of a house, the more discretionary the purchase becomes.
“Once you go north of £500,000 you’ve already got a good house, which you’ve possibly got room to modernise or extend. Between £450,000 and £950,000 [purchases are] more discretionary and therefore more sensitive to economic conditions.”
Mr Boyle noted that the day after the Brexit vote, Rettie & Co sold more houses than it normally does in a week, but added that changes to stamp duty have already slowed high-level sales and “the worry is that Brexit uncertainty leads to a further slowdown in that market, particularly if there are no changes to the Land and Building Transaction Tax threshold”.
“It’s going to be a real rigmarole,” he said. “There are no easy solutions and most industries are braced for this being a long, drawn out saga.”
Faisal Choudhry, director, Scottish residential research at Savills, said: “The next couple of years will be subdued; we’re expecting a slight dip in transactions numbers because of the uncertainty over the negotiations once Article 50 is triggered.”
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Mr Choudhry said too many unknowns remained to accurately predict how the market will respond to Brexit itself, adding: “the housing market depends on economic growth and how the economy performs depends on those negotiations.”
In Scotland the value of the mainstream residential property is expected to retract 2.5 per cent in 2017 before growing 1.5 per cent in 2018 and five per cent in 2019. Savills five-year forecast shows prices, on average, increasing nine per cent by 2021.
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