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Homeowners must accept softening prices to spur market activity – Jefferies

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  • 16/08/2016
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Homeowners must accept softening prices to spur market activity – Jefferies
Homeowners are showing the confidence to move house, but must accept softening prices in the post-EU referendum environment, research suggests.

Findings published by investment bank Jefferies showed that since the EU referendum, the number of property listings on the market has jumped 3.6%, while the proportion of lower asking prices for purchases has shot up to 34.5% from 29.3% prior to the vote.

Jefferies said a growing trend in lower asking prices suggested that UK households are still keen to sell up and move home, but should consider adjusting their price expectations.

On average, prices have dropped by 0.2% since the referendum, which is somewhat less than the movement in company shares that service the UK housing market, such as property funds and housebuilders.

Share prices at estate agents are on average 30% lower than prior to the UK vote to leave the European Union, while shares at housebuilders and property portals are 20-25% and 2% lower, respectively.

Jefferies said that some estate agency branches could be forced to close their doors, while housebuilders are being forced to err on the side of caution, particularly when it comes to land purchases.

“Our high touch data suggests that they [housebuilders] are perhaps priming the autumn selling season pump a few weeks earlier than normal to reduce the risk of a market lull, this seems sensible to us,” the findings said.

“We remain bullish on the UK housebuilders, our top picks are Bovis and Taylor Wimpey. We have seen large downgrades across the estate agents, which, in our view, is not backed up by our high touch data, if this situation remains unchanged the agents, in our view, offer very attractive entry points.”

Speculation leading up to the EU referendum, particularly within the political sphere, suggested that the UK could enter a recession if the nation voted to leave. However, Jefferies said that based on its current data, a housing recession is unlikely.

It said: “The current situation of rising listings and softening prices suggests that the UK housing market is functioning, albeit at levels below long run levels. If prices fell too much in the eye of the homeowner we expect listings to be withdrawn.”

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