It is now three months since the EU Referendum when the country surprised pollsters by voting to leave the European Union. Initial reactions to the news forebode economic turmoil and market crashes. It is still very early days, particularly in terms of data releases and it will be some time before we have the full picture of data available to us. However, in recent weeks, there have been a number of positive signs emerging to suggest a more measured response.
In their September report, the Monetary Policy Committee admitted that indicators suggested the economy had reacted more strongly than expected. Although GDP forecasts have been revised downwards from earlier in the year and the outlook for 2017 is still expected to be sluggish, improvement is expected from 2018. Meanwhile, the OECD was also forced to admit stronger performance than expected and has revised upwards its forecasts for economic growth in 2016 after its initial post-Brexit gloom.
The stock markets have also gained strength since their initial dip. As at 20th September, the FTSE FTSE 250 was back 3.3% higher than the level it closed at on 23rd June. Even housebuilder share prices have increased by an average of 36% since the low they hit in the days following the referendum. Having lost almost two fifths of their value in the immediate aftermath, they are now 16% below their pre-referendum level.
The proportion of people in employment reached its highest level ever in the three months to July at 74.5%. With new stories turning increasingly positive, after the biggest fall in 26 years in the immediate aftermath of Brexit, the GFK consumer confidence index rebounded in August.
In the months since the vote, agents in the RICS index have also become increasingly positive. In August for the first time since April, a higher number of agents expected sales rates and prices to increase in the next few months than those who expected a fall.
Back in August, the MPC voted to cut interest rates to their lowest ever level of 0.25% with some commentators anticipating a further cut in November. Few homeowners will have directly benefited from the cut and those that do will only see small adjustments to their monthly outgoings. However, the continuation of such low rates will provide a boost in confidence to home owners and buyers.
This is beginning to be reflected in residential transaction figures. Sales rates remained steady through August compared to July levels, although they were 6.1% below the level recorded in the same month of 2015.
Meanwhile, house prices are still rising across the country with low levels of supply supporting price growth. The ONS index reports that, while the rate of price growth has slowed, average sales prices have still increased by 8.3% in the last 12 months.
Three months have now passed without Article 50 being triggered and, while the Government has committed to a Brexit, the reality of what this will mean will take time to come to fruition. In the meantime, some sense of calm has ensued. We are not out of the woods yet and the market has not completely shrugged off the Brexit vote. As more data begins to emerge, we will be able to offer more clarity on the situation. The outlook remains unclear but, one thing is certain, we have not seen ‘Brexit Armageddon’!