Leaving single market ‘could halve house prices in top London postcodes’

HOUSE prices in the most expensive postcodes of central London could fall by as much as 50pc, according to analysis by Societe Generale.

The French bank said that Brexit could result in jobs in the City being cut and businesses potentially moving abroad, if access to the single market is denied. City workers would then have to sell their homes, which are mostly in very expensive areas of London, in order to relocate.

Marc Mozzi, an analyst at SocGen, said: “A simplistic ‘back of the envelope’ computation shows there were 3,140 real estate transactions registered above £2m in London in 2015 (and 920 in 2016 leading up to the Brexit vote).

“If we assume 500 managers from 20 firms relocate outside the UK (so as to retain access to the single market), of which one-third of those households are ‘forced-sellers’, we end up with a potential volume of these transactions for one to two years in that prime segment.

“Given the current ratio of prices to incomes in London, a price correction of even 40-50pc in the most expensive London boroughs does not seem impossible.”

This analysis only reflects potential falls in prime London real estate, which even before the referendum suffered sliding prices as demand fell. House prices in the rest of London and further afield are not expected to fall so steeply, with firms such as KPMG putting price falls outside London at 5pc.

SocGen added that house prices in London fell by 20pc during the subprime crisis of 2008, when 55,000 jobs were cut in the financial sector. Average London house prices have risen by 74.5pc since 2009.

PwC has said that there could be 70,000-100,000 fewer jobs in the financial services sector, and 950,000 job losses overall, as a result of the vote to leave the EU.

The upside is that properties in prime London areas are now much more attractive to foreign buyers as sterling has fallen since the result of the vote was announced on June 24. Furthermore, demand for homes in more reasonably priced areas of London and outside the capital continues to outstrip supply, suggesting house price falls will be limited.

The 2007-8 crash was particularly acute in commercial property; however, Soc Gen said that “commercial real estate [is] less of a risk this time around”, as commercial property prices have not risen at the same pace as residential: “Prices today are still 20pc below where they were in 2007,” it said.