The Press has excitedly been reporting about post-Brexit house prices in the last few days. If you just read the headlines you’d be forgiven for thinking that the bottom had truly fallen out of the market! Here, we’ll look beyond the headlines at the facts about what has actually happened in the housing market, as well as whether the alarm is justified.

Headline numbers
It’s true, average house prices have fallen since the Brexit vote. In central London, prices have fallen by 1.2% to £635,710 while in the rest of the UK, prices are down 0.9% to £307,824. So, whilst prices are indeed down, they’ve hardly crashed.

Was the market heading lower anyway?
While there is no question that Brexit has brought about great uncertainty, it is also true that analysts expected the housing market to slow in any case, irrespective of the referendum. The slowdown affecting the market, particularly in London has been going on for 18 months.

In particular, stamp duty changes announced back in 2014 came into being this April. The announcement which hit second home owners, led to a flurry of buy-to-let purchases in 2015 which inflated prices.
Additionally, new lending rules instigated by the Bank of England in the wake of the banking crisis continue to restrict lending to those that can afford to borrow.
Though completions in London are indeed down 18% since the vote, they’re down 43% on a year ago reflecting a trend that was already in play.
North versus South
Central London has seen the biggest falls in house prices since the vote. Some boroughs such as Lambeth and Southwark have seen prices fall by over 6.5%. Research shows that cuts to asking prices are up 163% in only 12 days since the referendum as sellers react.
There has though, been a surge in buyers from dollar based countries taking advantage of the 11% decline in sterling. London, already attractive to buyers from the Middle East has become even more so as price falls are more pronounced for these buyers.
Elsewhere in the UK, estate agents report that there has been a “marked drop” in activity as people wait to see what will happen next.

The spectre of negative equit
It is this difference between the London “bubble” and some other parts of the country which is perhaps most worrying. If prices fell by 10% in the Midlands and South East of England, only 0.3% of households would fall into negative equity. Even a 20% fall would only push 3.5% into this position. That’s because much of the country house prices are already past their pre-crash peaks, and risks are small.
For Scotland, Wales and the North of England though, it’s a different story. Here, prices are still off their 2007 peaks and the effects of price falls could be much more traumatic. In these regions a 10% house price fall would push nearly 10% into negative equity and a 20% fall would push 22% into this position.

Is there a positive light to be found in all this?
Well there are arguments to suggest that if inflated house prices are stabilising and falling modestly, that is good news for the market as a whole. If seller’s unrealistic prices are being managed down by more cautious buyers they argue, that’s a good thing.
With a growing population and well publicised housing shortage, houses that are sensibly priced will still sell. Coupled with this, borrowing costs remain at an all-time low and provided banks continue to lend sensibly to people who can afford to borrow, any fall in prices will be stemmed by buyers returning at the right price.

Where next for prices?

It’s simply far too early to say post-Brexit, whether the UK vote will have a lasting and sustained negative impact on house prices. The impact on the economy and in particular the job market will determine the medium and long term impacts, and it’s very early days to be predicting both.