London house-buyers get lift from Brexit
Prices may be high, but they are growing more slowly than in any other region in the country
At 24, Londoner Kai BraderTan did not expect to become a property owner so soon in a city where rocketing prices in recent years have prevented many of his peers from getting onto the housing ladder.
But the Brexit vote may have given him a step up.
A graduate in Chinese and economics now working for a sportswear company, BraderTan has bought his first-ever flat in south London’s gentrifying Brixton area.
“It’s been a fortunate turn of events,” he said, explaining that a drop in the asking price from £550,000 to £500,000 (from Dh2.65 million to Dh2.4 million) finally helped clinch the deal.
The capital’s housing sector has been affected by a decline in investment from abroad which many experts have blamed on last year’s Brexit referendum.
London house prices may be more than double the national average, but are now growing more slowly than in any other region in the country — the first time in 10 years that this has happened. One report last month even showed them falling.
Inflation
A rise in inflation to 3 per cent and the quarter-point increase in interest rates projected for November could bring down prices even more.
But there is little cause for celebration among developers, estate agents and investors. The jitters about Brexit were palpable at the MIPIM UK property conference in London this month.
“The B-Word is the real concern,” said Paul Steward, a strategist at Barings investment management firm.
“The hike in rates is tiny and we think this inflation is a blip. We’re more worried about the downward economic trend overall,” he said.
Martijn Vos, portfolio manager for European investments at Dutch financial services group APG, agreed.
“The issue is not so much interest rates and inflation, but the EU referendum,” Vos said.
Once the uncertainties surrounding the Brexit process have been settled, “we can see how to deal with the other factors.”
Foreign investors have been examining the fall in the average property price by 0.6 per cent year-on-year in the last three months — the first such decline since 2005, according to data gathered by Nationwide, the UK’s largest mortgage provider.
Just weeks before the UK voted to leave the European Union in June 2016, London’s housing market was comfortably ahead of the rest of the country in terms of growth, official statistics show.
But by the end of the month, London was no longer the fastest-growing region, and the capital has not recovered its crown since. Foreign direct investment into UK property plummeted from a five-yearhigh of £214 million (€241 million, $280 million) in the third quarter of 2016 to £77 million in the second quarter of 2017.