London home price sentiment falls on Brexit

A measure of London home-price changes fell to its weakest since the financial crisis as the UK’s vote to leave the EU sent shock waves across the nation.

The index by the Royal Institution of Chartered Surveyors dropped to minus 46 in June from minus 35 the previous month, showing that more real-estate agents are recording lower prices in the capital than higher ones.

The reading was the weakest since early 2009. All responses were received after the EU referendum on June 23.

A separate report from Acadata and LSL Property Services showed home values in London were already being hurt ahead of the vote, with prices decreasing 1.4% in May, the biggest monthly fall since June 2011.

RICS’s survey provides the first insight into the impact the decision to leave the EU is having on the housing market.

It shows nationwide demand falling to its lowest level since the middle of 2008, while the number of properties put up for sale plunged to a record low. A gauge of sales expectations for the next three months was at its weakest in 28 years.

“It was always likely we were going to see a bit of a fallout from the EU referendum,” Simon Rubinsohn, RICS’s chief economist, said.

“It’s also part of a trend that emerged at the start of the second quarter, particularly the London data,” he said.

The trade body said its measure of national house-price changes declined to 16 in June from 19 in May. While that indicates overall prices were still increasing, it’s the lowest reading since January 2015.

RICS said a measure of near-term price expectations fell to minus 27, with all the 12 areas in England and Wales it tracks in negative territory.

Its nationwide gauge of price expectations for the next year plunged to zero in June from 54. The survey was conducted between June 24 and last week.

“Economic uncertainty deters spending on long-lived assets such as houses,” said Kallum Pickering, an economist at Berenberg Bank in London.

“But fundamental market imbalances will probably limit house-price declines: a lack of housing supply combined with existing demand-side policies like Help to Buy and Help to Buy London — plus low interest rates,” the economist said.

In their report, Acadata and LSL said values in England and Wales rose 0.6% in June from May to an average £293,444 (€350,858), the first gain in four months. On an annual basis, value inflation slowed to 6% from 6.1%.

The drop seen in London in May, the most recent month with regional data, took the average price of a home in the capital to £589,435, with 21 of its 33 boroughs registering a fall, LSL and Acadata said.

Hackney, Wandsworth and Hounslow posted the biggest declines, with values decreasing by more than 4% in all three areas.