Brexit hits prices and turnover in UK housing market

The UK’s vote to leave the EU will have a negative impact on prices and turnover in the UK housing market, with foreign investors set to benefit most from bargains among sterling-priced assets, a Reuters poll has found.

However, British house prices — a bedrock of consumer wealth — will still rise 2.8% this year, by 1.3% next and 2.4% in 2018, according to the poll of 24 economists, estate agents and brokers taken in the past week.

London prices will be up 2% this year, not rise at all next year and then rise 2% in 2018.

“Short-term uncertainty and a weaker economy look set to put a dampener on turnover over much of the next 12 months,” Investec chief economist Philip Shaw said.

“But demographics remain a positive driver, banks remain open for business and we envisage slower [economic growth] rather than a collapse.”

Nearly all respondents said Britain’s impending departure from the EU would hurt house prices as well as turnover, which matters more for housing’s contribution to the overall economy.

Property was one of the hardest hit sectors after the result of the vote. However, earlier this week, Persimmon reported a jump in reservations by buyers of new houses over the last two months.

Just over a third of respondents have pencilled in a fall in house prices next year, but those falls were quite tame compared to the heady rises seen during the boom years.

Investors have been snapping up London property for nearly two decades, making huge capital gains on soaring prices, and now that sterling has fallen by more than 10%, investment properties look that much cheaper for new foreign buyers.

They were overwhelmingly picked by respondents to the poll as the most likely to benefit from Brexit.

“Foreign buyers will benefit not only from steadier house prices but also from the chance to buy at a lower sterling exchange rate,” said ADM Investor Services’ Stephen Lewis.

Home ownership remains out of reach for many. The average asking price for a home fell 1% to £304,222 (€356,207) this month, said property website Rightmove — more than 11 times the average British salary.

Although borrowing costs are at a record low, British banks approved the fewest mortgages in a year in the month after the referendum, figures showed yesterday.

A CBI survey found British retailers reported their strongest sales in six months in August, adding to signs that consumers are taking the country’s vote to leave the union in their stride.

Reuters