London house prices have 30% chance of crashing if no-deal Brexit goes ahead, experts say

One expert predicted house prices could fall by as much as 40 per cent in the event of a disruptive exit from the EU

Caitlin Morrison
Wednesday 29 August 2018 09:57
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London house prices falling at fastest pace since recession, new data reveals

House prices in London are set to fall this year and next, and could crash if a no-deal Brexit occurs, according to a Reuters poll of property experts and analysts.

Respondents predicted prices in the capital will fall 1.6 per cent this year and 0.1 per cent in 2019, although for the UK in general they are set to rise 2 per cent this year and next, and 2.3 per cent in 2020.

The national average price for a property was £301,973 in August, and in London it rose to £609,205.

“The weight of evidence suggests that housing is overvalued once more,” said Hansen Lu at Capital Economics.

Experts said there was a one in three chance of a “significant correction” in the London market. When asked what effect a disorderly Brexit would have on prices, answers ranged from “short term fall” to “damaging” to “disaster”.

When asked about the likelihood of a significant correction in London’s housing market before the end of 2019, the specialists gave a relatively high median of 29 per cent, with the highest response 75 per cent.

One respondent predicted house prices could fall by as much as 40 per cent.

“We see little upward or downward pressure on house prices at current near-zero interest rates. However risks lie substantially to the downside,” said Andrew Brigden, at Fathom Consulting.

“Were interest rates to return to pre-crisis levels, or higher – which may prove necessary if there were a sharp fall in sterling after a general election, for example – then house prices could fall by around 40 per cent.”

The Bank of England recently raised interest rates above 0.5 per cent for the first time since the financial crisis, and said the rate would continue to increase at a gradual pace over the next few years.

Survey respondents also noted the weaker poundsterling fell to a one year low against the euro this week – should be attracting foreign investors to the UK property market, but said uncertainty around Brexit was keeping them away.

“Central London is tanking because the traditional international buyers are staying away and the [number] of buyers is falling. A disorderly Brexit will exacerbate this trend,” said Tony Williams at property consultancy Building Value.

Recent data from Rightmove showed asking prices in the UK dropped by more than £7,000 in August, due to more sellers arriving on the market.

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