[attitude for] the short-term impact on financial markets and the economy at large,” he said.
Donnell added that in the past, external shocks to the market had reduced sales volumes by as much as 20%.
Capital Economics said it expected transaction levels to be hit harder than prices in the coming months and cut its 18-month forecasts for mortgage approvals and sales by 10%.
Jan Crosby, head of housing at KPMG UK, predicted transaction volumes would decrease and “stay deflated for some time – perhaps until next spring. While we may not notice much of a change over summer, given the traditional hiatus in the housing market, the usual pick up in autumn may not materialise.”
Crosby said the impact on prices would depend on the house builders’ reaction, but it was likely there would be a price drop of around 5% in the regions, possibly slightly more in London. However, he added: “We are most likely to see a drop in the growth in asking prices rather than pricing, which will likely change less.”
In the run-up to the referendum there were already signs of a slowdown in interest, with the Royal Institution of Chartered Surveyors saying uncertainty over the outcome had driven the biggest fall in the number of people trying to buy a property since the financial crisis.
The Treasury had forecast that Brexit would prompt a fall in house prices of up to 18%, while the National Association of Estate Agents (NAEA) predicted that an out vote would cut levels of immigration and depress future price rises, leaving the average UK house worth £2,300 less in 2018. It predicted a £7,500 fall in London.
Donnell added: “The decision to leave the EU will be most keenly felt in the London housing market, which is fully valued and already facing headwinds. House price growth is already weak and running in low single digits in central London areas, and modest price falls now appear likely in higher value markets as prices adjust in the face of lower sales activity.”
Andrew Reeves, who runs an estate agency in London, said the result removed some of the uncertainty from the market and buyers who needed to move would re-emerge and begin their searches. “Non-urgent buyers will be less enthusiastic, instead waiting to see if house prices soften further, and this may well continue throughout the rest of 2016,” he said.
“Decisions by international banks and multinational companies in the City on whether to stay put or move out of the UK may have some influence on both property sales, and on rental demand from corporate tenants.”
Housebuilders Taylor Wimpey, Persimmon, Barratt, Berkeley Homes and Bellway were all down by some 20%, while shares in estate agency chain Countryside were down 26% an hour after the market opened. The FTSE 100 was down 4.85%.
Henry Pryor, a buying agent for wealthy clients in London and the south-east of England, said two of his clients had already pulled out of deals “saying they want to wait and see what happens”, while one had reduced their offer. “I had one exchanged with a Brexit clause,” he said. “Question is whether they will trigger it. I’m not sure they will.”
One first-time buyer told the Guardian he was concerned about his purchase. “The worrying thing is I don’t have a clue what’s going to happen,” said Pete from Stoke Newington in London. He added: “Will our mortgage application still go through? Will our repayments be too high if the economy suffers as a whole? Will we be buying at the worst time possible and house prices drop 10%-20%? It’s added even more uncertainty to the already stressful process of buying our first home.”
But while the wider market may slow down, agents in the most expensive parts of London suggest that overseas buyers could rush in as sterling falls and reduces the cost to them of UK property.
Peter Wetherell, who runs an estate agency in Mayfair, said the decision to leave could lead to a Brexit bubble in some parts of the London property market.
“This morning already sterling has plummeted to a low not seen since 1985 and this will now create a short-term buying opportunity for US dollar- and euro-based property investors,” he said.
“This is a market for risk-takers and people able to spot high-risk but potentially lucrative opportunities that have emerged overnight due to the fluxes in the markets. Dollar-based Middle East and Asian investors in particular will now wake up this morning and look at short-term buying opportunities in the central London property market.”
On Wednesday, James Evans, a director at Douglas & Gordon, which covers south and west central London, said a vote to leave would mean “an exciting buyers’ market”. He said: “If there was a fall in appetite it would be filled very quickly by people who are sitting on a lot of cash and not getting a return anywhere else. These would be domestic buyers with cash or foreign buyers who are also getting an extra bonus because of the currency.”
At Sotheby’s International Realty, which deals with the ultra-wealthy, joint chairman Robin Paterson said the property market “should embrace this wholeheartedly”.
“We may have fewer European investors in the coming months but we believe there will be significant inward investment from Asia, as well as from the US. Buyers from these regions will undoubtedly be looking to snap up bricks and mortar in the UK with the predicted fall in sterling.”
Meanwhile, property investment firm London Central Portfolio Limited (LCP) predicted price rises in the capital’s prime neighbourhoods. “While LCP had originally predicted that this would not occur until 2017, the signs are that the re-entry of investors into the market will be more rapid than originally expected,” it said, adding that there had been “a stream of inquiries from the early hours of this morning”.