EU banker exodus hits London property, BoE's McCafferty says

LONDON: An outflow of European bankers from London is damping prices and rents in the capital’s housing market, Bank of England policy maker Ian McCafferty said on Tuesday.

“We have seen an exodus of people – such that certain properties in London are now finding it harder and the prices in London are now reacting,” McCafferty, who is due to leave the BoE this month, said in response to listener questions on LBC Radio.

“We’re getting stories that the number of French and German and other European bankers that are coming to London has fallen quite sharply over the course of the last couple of years.”

The number of applicants from EU countries excluding the UK seeking to buy homes in London fell in the second quarter, according to data compiled by researcher LonRes.

Just 14% of agents recorded an increase in demand compared with the first three months of the year.

London’s housing market has seen prices decline as Brexit and slower growth dent demand after a three-decade boom that left valuations stretched.

McCafferty said that the capital is seeing “significant change as a result of uncertainty around Brexit.”

The BoE, which hiked interest rates for the second time since the financial crisis last week, noted the weakness in the capital in its August Inflation Report.

Policy makers said it may “reflect a fall in net EU migration, alongside wider Brexit uncertainty.”

“The number of EU nationals in London appears to have fallen slightly since the EU referendum,” they said.

“As EU nationals make up around 12 % of households in London and 20 % of the private rental sector, that fall will affect demand for housing services and therefore house prices and rents.”

The BoE’s decision to raise interest rates garnered criticism from some economists, who said doing so ahead of the UK’s exit from the European Union could prove to be a mistake.

Carney was also criticized by pro-Brexit lawmakers for wading into the political debate after he said that the chance of a no-deal Brexit is “uncomfortably high.”

In comments that could further stoke that criticism, McCafferty said on Tuesday that a no-deal Brexit would be a negative for the economy.

Known as possibly the most hawkish member of the BoE’s rate-setting committee. — Bloomberg