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Property prices and the impact of hurricanes

13 October 2017

Have house prices been impacted by Brexit?

Since the Brexit vote, the UK economy has proved that it is more robust than originally anticipated and has generally performed much better than expected. However, this week the Royal Institute of Chartered Surveyors (RICS) published their latest monthly report on the state of the UK housing market. This report is one of the best indicators of the condition of the market and is used by the Bank of England. While the headline figure was marginally positive for the UK as a whole, the reading for those of us who own property in London and the South East was not good.

Over the Brexit vote in June last year the readings nationally dipped. They appeared to recover slightly but have been close to flat over the last two months. Forward looking indicators, such as the New Buyer Enquiries Index, have fallen again and excluding the Brexit dip are at the lowest level seen since the financial crisis in 2008.

London rose the most and therefore, if there is a correction, it is not surprising that it falls more than other regions.  With other regions still holding up, Brexit is having a disproportionate impact on London and the South East. The London economy is heavily dependent on the financial industry and with banks talking of relocating to Europe, the Brexit uncertainty weighs most heavily here. If the financial industry manages to maintain the right to trade in Europe post Brexit then fears may be overdone. However, it is understandable that buyers are reluctant to make the long-term commitment to buy property when the future is so clouded.

One warning to the regions is that, while they may be playing catch up with some of the past gains in London now, they may suffer later. Typically, where London leads on house prices the rest of the country has a tendency to follow later.

Are we seeing any impact from the hurricanes in the US economy?

Since the Hurricanes in August, we have been warning that US economic data will be hard to interpret for upcoming months.  A potential indicator of what is to come is this month's employment data: the non-farm payrolls showed a fall of 33,000 but the wage data was positive. The other survey data has also remained positive. While some businesses have been destroyed, others will be able to benefit from the reconstruction building. As we progress it will be important to look at individual state data and pay close attention to the composition that underlies the headline numbers.

The Federal Reserve has more data on the economy than anyone else. It is happy pressing ahead with its balance sheet reduction programme and is on track for a further rate rise in December. Despite the non-farm payrolls headline figure. With the ISM Manufacturing Purchasing Managers Index at the highest level since 2004, the wider economy appears to justify these moves.

 

 

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