Post-Brexit malaise in the U.K. real estate and construction sectors increased on Monday after a closely watched gauge of sentiment dramatically worsened
Markit's construction sector PMI fell to 46 in June from 51.2. The June reading marked a seven-year low and was much worse than the expected outcome of about 50.5. Readings under 50 signal economic contraction and the June data marked the first time the index had fallen below that mark since April 2013. Most of the responses to the Markit survey were culled before the U.K.'s June 23 referendum on European Union membership, which resulted in a "leave" victory.
"Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum," noted Markit senior economist Tim Moore. "However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook."
Real estate companies and home builders led the decliners on the FTSE 100 after the survey, with developers British Land (BTLCY) Land Securities (LSGOF) and Hammerson (HMSNF) and home builders Berkeley Group Holdings, Barratt Developments (BTDPY) , Taylor Wimpey (TWODF) and Persimmon (PSMMY) each down well over 2%. The pound recently slipped 0.08% against the dollar to $1.3256.
The PMI data highlighted a steep drop in residential building and a smaller decline for the commercial property sector.
It follows a post-Brexit warning by residential real estate consultant Foxtons (FXTGY) , which said on June 27 it expects significantly lower 2016 revenue and Ebitda because of uncertainty on the London and southeast England residential real estate market caused by the run-up to - and aftermath of - the Brexit vote.
Even though demand for homes outstrips supply in the U.K. by several hundred thousand, many economists predict that the U.K.'s departure from the EU will weigh on house prices. In one of the gloomiest forecasts, Fitch predicted a potential crash of up to 25% in a publication it released before the vote.
Singapore's United Overseas Bank, meanwhile , said last week it has temporarily halted mortgage loans for London properties.