House prices in London will fall this year and next, with the possibility of a full-blown crash if Britain leaves the EU without striking a deal, according to a poll of housing market specialists.
Prices in the capital are expected to fall by 1.6% this year and 0.1% next year, a quarterly Reuters poll of about 30 analysts found, as the international buyers traditionally attracted by the London property market are put off by uncertainty surrounding Brexit negotiations.
“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.
There is about a one-in-three chance of a significant correction in London house prices by the end of 2019, according to the poll. When asked what effect a disorderly Brexit would have on house prices in the capital, 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,” said Ray Boulger at mortgage broker John Charcol.
Britain is due to leave the EU in March 2019 and fears are rising that the government will fail to agree a deal with the bloc before then.
London is now a weak spot in the wider UK housing market, with many homebuyers unable to afford a property in London after a run of strong house price in the capital. Meanwhile a higher rate of stamp duty on second homes has also weighed on buyer appetite in London.
The average asking price for a home in London was £609,205 in August according to the property website Rightmove, more than double the national average of £301,973.
“The weight of evidence suggests that housing is overvalued once more,” said Hansen Lu at Capital Economics.
When asked to rate the level of London house prices on a scale of one to 10, where one is extremely cheap and 10 is extremely expensive, the median response in the Reuters poll was nine. On a national level, prices were rated seven.
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