House prices in London’s hyped market will fall this year and next, a Reuters poll of analysts and experts predicted, and will tumble if Britain fails to agree an orderly departure from the European Union.
The quarterly poll of around 30 housing market specialists, said house prices in the capital – where foreign investors have previously fuelled skyrocketing prices – will fall 1.6% this year and 0.1% next.
“Central London is tanking because the traditional international buyers are staying away – and the quantum of buyers is falling.
A disorderly Brexit will exacerbate this trend,” said Tony Williams at property consultancy Building Value.
Uncertainty over how Brexit negations pan out has already spooked foreign investors. When asked what effect a disorderly departure would have on London prices, responses ranged from “short-term fall” to “damaging” to “disaster”.
“In the short term the additional uncertainty will disproportionately affect London, causing the value of some properties, particularly high value properties, to fall further,” Ray Boulger at mortgage broker John Charcol told Reuters.
Britain is due to leave the EU in March and sterling fell to a near one-year low against the euro on Tuesday amid no-deal angst. A weaker currency should make UK houses more attractive to foreign buyers, but Brexit fears is keeping them away.
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%. The highest was 75%.
But that might not be a bad thing – certainly for first-time buyers.
“The weight of evidence suggests that housing is overvalued once more,” said Hansen Lu at Capital Economics.
In August the average asking price for a home nationally was £301,973 and in London a whopping £609,205, according to property website Rightmove, putting home ownership out of the reach of many – despite historically low borrowing costs.
The Bank of England pushed interest rates above their financial crisis lows this month but signalled it was in no hurry to raise them further. It will add another 25 basis points in the second quarter of next year, taking Bank Rate to 1%, another Reuters poll predicted.
with mortgage rates staying low UK house prices are expected to increase nationally by 2% this year and next – slower than inflation – and then 2.3% in 2020.
