Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

London property prices are falling because of Brexit

The number of cuts to asking prices surged by 163 per cent in the 12 days following the referendum

Zlata Rodionova

Monday 18 July 2016 10:35 BST

Buyers from the eurozone gained a €50,900 (£42,000) discount on the average London house price in the wake of the referendum result (Getty Images)

London property prices are falling following UK’s vote to leave the EU.

The vote triggered a wave of discounts as nervous owners slashed their asking prices following the surprise victory of the Leave campaign.

The number of cuts to asking prices surged by 163 per cent in the 12 days following the referendum, compared to the 12 days ahead of the vote, according to figures from LondRes, a property research firm.

But the post-Brexit discounts have failed to encourage people to buy.

Completions, measured as the day money has been transferred and the purchaser can move in, fell by 18 per cent before the vote on the EU membership. The numbers were down by 43 per cent compared to a year earlier in London’s 30 most central postal districts.

The figures suggest that vendors have come to terms with the fact that they must drop asking prices to offload homes. Buyers, on the other hand, are becoming more demanding as they want to secure deals that will protect them from potential price falls.

“This is a very, very different market to a week ago. I’m now trying to do deals 10 per cent below where they were a week ago and central London is already down 10 to 15 per cent from its peak,” Henry Prior, a buying agent said the week after the referendum.

A downward trend in house sales is expected to continue through the summer as buyers put off their plans amid uncertainty, according to the Royal Institution of Chartered Surveyors.

Surveyors said house sales were down in June and are expected to drop another 26 per cent over the next three months in the most negative reading since 1998.

The Brexit vote has however triggered an interest from overseas property buyers.

6 ways Britain leaving the EU will affect you

Show all 6

1/66 ways Britain leaving the EU will affect you

6 ways Britain leaving the EU will affect you

More expensive foreign holidays

The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more

nito100

6 ways Britain leaving the EU will affect you

No immediate change in immigration status

The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay

Getty

6 ways Britain leaving the EU will affect you

Higher inflation

A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum

AFP/Getty Images

6 ways Britain leaving the EU will affect you

Interest rates might rise

The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output

Getty

6 ways Britain leaving the EU will affect you

Did somebody say recession?

Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018

AFP/Getty Images

6 ways Britain leaving the EU will affect you

And we wouldn’t even get our money back

All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget

Getty Images

Estate agents in the UK have been swamped with calls from Chinese, Middle Eastern, Italian and Spanish buyers looking for a bargain after the pound tumbled to 30-year lows in the week after the EU referendum, making the exchange rate very favourable for foreign buyers.

Buyers from the eurozone gained a €50,900 (£42,000) discount on the average London house price in the wake of the result, according to Stirling Ackroyd, a London estate agent.

“European buyers can now snap up real bargains across London. Overnight London has become a more affordable global property hotspot – particularly for those paying in euros,” said managing director Andrew Bridges.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies