Post Brexit – What happened to the housing market?

Reality and perception can be two delightful, and frankly enjoyable, opposites especially in post Brexit days. As the reality of a leave result sent shockwaves through currency and global markets two very important statements remained true:

  1. There is a chronic housing shortage
  2. Not enough houses are being built each year. (The current government’s objective being a million new homes built by 2020. Which would need a net rate of 200k units per annum. Last year this was circa 146k units).

post brexit housing marketTrending a new build market is fun and open to spin. It becomes even more focal when you are allegedly in the middle of a storm where it is easier to look for hope, aspiration and a quick way out rather than delving into science, history and logic. It is usually the captains that navigate with the latter that excel in steering their ships, and fleets, to calmer waters.

Market research throws up very interesting facts. People a lot more clever and literate than I get paid significant sums to analyse and give their opinion, however, it’s important to remember, it is opinion, it is perception.

The latest Halifax figures demonstrate an easing of house prices, (still up and around 8.4%, significantly above the rate of inflation). However these figures would have been collected pre Brexit result so the assumption is the market may well be on a slowdown, or as many think the start of a large correction, prior to the leave result.  “House prices continue to increase, albeit at a slower rate, but this precedes the EU referendum result, therefore it is far too early to determine any impact since,” in the words of Martin Ellis, Halifax’s housing economist.

But is it? With market values beginning to slow people will be a little more cautious with buying and selling? Well no, not really the case as highlighted by Jackson-Stops and Staff intelligence based around the 24th June and then taken post Brexit on the 6th July. Of the 750k properties for sale on June 24th 41% were under offer, compared to the 39.9% on the 6th July. Not an incredible difference. However over the period the number of properties for sale had increased by a further 21k. So when is too early, too early?

So we’ve already established that house prices are continuing to rise, albeit it more slowly and the immediate impact to buying and selling seems not to be significant. (note –  the above stats don’t make reference to the increase in stamp duty for property investors which will have a natural impact the buy to let market and in turn availability being higher, more stock often means prices are pushed down rather than up).

But what about planning pipeline? Well the latest Glenigan housing reports states ‘Residential planning approvals slipped back during the first quarter of 2016 from the high level seen in the final three months of last year, but remained ahead of a year ago. At 73,300 the number of units approved during the quarter was 14% down on the previous quarter, but 4% up on the first quarter of 2015′.

‘The year on year rise was driven by 17% increase in the number of private housing units approved. In contrast 20% fewer social housing units were approved’ (Glenigan Housing Report Q1 2016 Report). There always will be an end of year push in any industry, planning applications are no different. Large housebuilders will want to assure shareholders that planning is in and these will be the properties that will be being built this year and going forward. Not sufficient planning numbers will make investors nervous about profitability in the pipeline and in turn the growth or income/dividend in my share portfolio.

In summary, data tells us that house growth, whilst slowing, continues to increase, buying and selling is still buoyant and the number of planning permissions granted continues to grow year on year, albeit that we are not anywhere near the level of new builds the government pledged.

Locally, within Robinson Manufacturing we have seen no slow down. The opportunities to tender have continued to increase and opportunities won have taken our order book to never seen before levels. Our customers still believe in the market and the ability we have to meet their expectations with service and product. We’re still witnessing the slowdown effect of some materials being more elusive than others combined with skills gaps still being filled. However looking at our production planners and talking to our customers there is definitely a ‘foot to the floor’ mentality on the building front. The summer looks like being a very busy one.

Reality and Perception can indeed be two very different things….

Simon Kidney
Chief Operating Officer