Investment Clock insights

Housing weakness temporary; gilt buyers beware

Trevor Greetham

9 June 2016

The Royal Institution of Chartered Surveyors (RICS) housing market survey for May showed a sharp deterioration. The New Buyer Enquiries balance is at its lowest ebb since the financial crisis, suggesting that nationwide house prices could drop by 5% over the coming year. Increases in stamp duty and a tougher tax treatment of buy to let investment has certainly had a large impact, visible in the surge in housing transactions ahead of the new rules. However, we suspect the EU referendum is also having a large negative impact on sentiment here and elsewhere as economic uncertainty deters would be buyers. If the outcome of the vote is Remain, as we expect, then business and housing market confidence should recover into the year end, raising the prospect of the Bank of England following the US Federal Reserve in hiking rates. Gilt yields have hit new lows on the back of soggy data and the start of European Central Bank bond purchases, but we remain firmly underweight in our multi asset Funds.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.