RICS UK Property Market Expectations Fall to Record Low : Pound Sterling (GBP) Forecast Plunges on Haldane Comments

July 15, 2016 - Written by Ben Hughes

STORY LINK RICS UK Property Market Expectations Fall to Record Low : Pound Sterling (GBP) Forecast Plunges on Haldane Comments

The Pound has dropped off heavily of late, with hints from Bank of England (BoE) official Andy Haldane raising serious concerns that August will see a BoE interest rate cut.

Pound Gains after BoE Interest Rate Decision But GBP Exchange Rates Forecast to Fall

The general message from the Bank of England’s monetary policy committee minutes yesterday was that it was too early to judge whether a UK interest rate cut was yet merited following last month’s Brexit vote. The notes observed that,
‘Official data on economic activity covering the period since the referendum are not yet available. However, there are preliminary signs that the result has affected sentiment among households and companies, with sharp falls in some measures of business and consumer confidence.’

Predictions of Impact of Brexit on Economy See Pound Sterling (GBP) Pressured

However, the memos went on to suggest that the likelihood remains that last month’s Brexit decision has had a negative impact on the British economy. The minutes elucidated on this, observing that,

‘Early indications from surveys and from contacts of the Bank’s Agents suggest that some businesses are beginning to delay investment projects and postpone recruitment decisions. Regarding the housing market, survey data point to a significant weakening in expected activity. Taken together, these indicators suggest economic activity is likely to weaken in the near term.’

The latest survey of the UK housing sector from the Royal Institute of Chartered Surveyors, published during the early hours of yesterday morning, suggested that new buyer enquiries had dropped to their lowest level since the dark days of the global financial crisis in 2008. Meanwhile, expectations of future sales from the surveyors questioned dropped to their lowest level since the survey was instigated in 1998.

UK House Market Fears Could Weigh on GBP to EUR, USD Exchange Rates

Simon Rubinsohn, the RICS chief economist, noted that, ‘big events such as elections typically do unsettle markets, so it is no surprise that the EU referendum has been associated with a downturn in activity.’

He went on to surmise that the UK housing market was softening before the referendum, noting that,
‘even without the build-up to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year.’
He concluded that, ‘RICS data does suggest that the dip in activity will persist over the coming months, but the critical influence looking further ahead is how the economy performs in the wake of the uncertainty triggered by the vote to leave.’

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