UK housing market weathers Brexit clouds, but sharp gains unlikely

(London) REUTERS: Britain’s expensive housing market has so far weathered the uncertainty swirling around the country’s planned departure from the European Union, but average prices are unlikely to rise sharply and will fall in London this year, a Reuters poll found.

Nearly three years ago Britons surprised most of the world when they voted to split from the EU, yet it is still unclear how, when or even if the two sides will part ways.

Prime Minister Theresa May said on Sunday she would make a final attempt to get her Brexit divorce deal through parliament before she leaves office, something she has failed to manage three times already.

With no resolution in sight, Brexit uncertainty has affected property prices in the capital - long a magnet for foreign speculators - as people have shied away from investing, despite a fall in sterling since the referendum making UK housing a relatively cheaper investment.

Real estate agent Foxtons, which focuses on the London market, said on Monday UK property sales were running at record lows due to the impact of Brexit on consumer confidence.

According to the May 10-21 Reuters poll, prices will drop 2.0 percent in London this year, the same median forecast given in a February survey.

But that might not be a bad thing for buyers. When asked to describe the level of London house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 8.5, higher than in previous surveys. Nationally they were rated 6.0.

“It’s the same old story housing is cheap for those with some capital behind them, given low funding costs, but very expensive in terms of the income multiple,” said Peter Dixon at Commerzbank.

The average annual British salary is about 30,000 pounds (US$38,100) and yet the average asking price for a home in Britain was 308,290 pounds this month, and more than double that in London, property website Rightmove said.

For those already on the property ladder, borrowing money is cheap. The Bank of England has set bank rate at 0.75 percent and is not expected to raise it any time soon.