There were warnings ahead of the EU referendum that a Brexit could send house prices crashing. The credit rating agency Standard & Poor's suggested the recent years of property price rises could be reversed. An analysis by the Treasury has also predicted that a severe economic shock could knock house prices down by 18%.
Others, of course, played down concerns about the housing market. Former Bank of England policymaker David Miles, who called the 2007 crash, said the Treasury analysis shows a recession much smaller than we experienced after the financial crisis. House prices have already recovered from the crash, he said, casting doubt on the severity of a Brexit impact on the housing market. Capital Economics say transactions rather than prices will take the strain. Ahead of the vote, the market softened as investors and homebuyers paused for the verdict.
So when will we know if the vote for Brexit has crashed the housing market? There will be a number of early warning signs from those working in the sector; for example, anecdotal reports from estate agents about achieving significantly lower prices and fewer buyers in the market. A Financial Times report on the Sunday after the referendum said some property buyers were already pulling out of transactions in the aftermath of Brexit, though it is still very early days.
What will give a clearer picture are the many statistical reports from the property market. Because the referendum was on 23 June, it will not be until the end of July and early August that the immediate period after the Brexit vote will be covered by these reports, which are released at different times in the month. The September and October reports will show if any initial problems are persisting, or if they were just a blip.
All eyes will be on the major monthly house price indices — Nationwide, Halifax and the ONS in particular — to see if there has been any drastic month-on-month change in average prices and sales volumes. Eyes will also be on mortgage credit data from the Bank of England, the Council of Mortgage Lenders (CML) and British Bankers Association in particular.
These will indicate if there has been any slowdown in mortgage approvals or applications; whether banks are less willing to give credit or homebuyers less willing to ask for it under the cloud of Brexit uncertainty. There will also be information on interest rates — if mortgages have suddenly become more expensive after the Brexit vote — or the levels of loan-to-income borrowers are able to achieve. Tighter credit conditions will be reflected by higher interest rates, lower loans-to-income, and fewer approvals.
"The electorate's vote to take the UK out of the European Union presents another potential headwind to a housing market already labouring under worryingly high prices," said Capital Economics in a research note. "But if we are right that the economy will not fall back into recession, transactions, not house prices are likely to take the strain. Of course, we could be wrong if the economy proves more fragile than we expect, or if overseas buyers decide to dump central London market property. But to us, both of those outcomes seem unduly pessimistic to form a sensible central scenario."