The Hometrack UK Cities Index, which is based on historic research, showed that rather than hitting house prices the hardest, consumer uncertainty around the economy and personal finances tends to have a greater impact on the volume of housing transactions.
London, which is more susceptible to the impact of external factors, would suffer most in the event of a vote to leave, the report said. However, a decision to remain would see a boost to market confidence and deliver the greatest benefit to large regional cities such as Manchester, Leeds and Birmingham, where the market’s recovery from the financial crisis has been more short-lived and with affordability less stretched.
Richard Donnell, insight director at Hometrack, explained: “After a period of strong house price inflation over the last five years, the London market faces greater headwinds irrespective of the referendum vote. Turnover fell 7% last year on the back of affordability constraints and weaker overseas demand. Tax changes for investors will reduce demand and we expect price growth to slow in the near future even if sterling were to weaken and improve the relative value of central London property.”
Despite this, house price growth remains strong and has grown to 10.4% compared to 6.6% 12 months ago when it slowed in the run up to the general election. This spike is largely down to the recent surge in transactions recorded in the run up to the 1 April Stamp Duty change, Hometrack said.
Jeremy Duncombe, director, Legal & General Mortgage Club, added: “It won’t be surprising if we start to see a more sceptical housing market as the referendum decision grows ever closer. Events like these, where the outcome is unknown, breed uncertainty in the market, as borrowers tend to take stock before making any big decisions. In order to ensure the housing market returns to full health, the Government needs to boost the housing supply to create thousands more affordable homes across the UK.”
