With the date for Brexit now less than a year away, property industry experts are predicting a difficult time ahead for the London housing market as it could be set to see its first annual fall since the financial crisis.
Between a group of 30 specialists polled this week by Reuters, it was decided that London house prices were set to deflate by an average 1% over the course of 2018 – but views were mixed with one respondent predicting a massive 6% drop.
Compared to the national average house price performance, which is expected to see a modest rise of 1.7% this year – subject to significant regional variations – London is still seen to be lagging behind by property market insiders, and much of this has been put down to Brexit.
The latest figures from the Office for National Statistics (ONS) show that house prices in London dropped by 0.7% year-on-year to March 2018 to £471,944, which was the biggest fall seen since September 2009 in the aftermath of the credit crunch.
More clarity is needed
Since the EU referendum, the pound is down against the dollar by 10%, which could be great news for foreign investors, but some are opting to stay clear of the capital until the market regains some of its momentum. Next year, the poll revealed that some recovery can be expected, with house prices nationally forecast to grow by an average of 2%, but London is still expected to trail behind with a small 0.5% price increase.
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Oliver Knight, associate at estate agency Knight Frank, said: “There is a lot of uncertainty in the market as to where we are with Brexit negotiations. That has really kept a lid on further growth.”
The poll revealed that most people thought there was not enough clarity around the post-Brexit outcome at the moment, which was leading people to adopt a “wait and see” approach to property investing, while other factors such as tax changes for landlords were also affecting prices.
Peter Dixon, an economist at Commerzbank, said: “There is evidence to suggest that the phasing out of mortgage tax relief for buy-to-let owners has hammered the market. This will let some much needed air out of the market, particularly in London and the south-east.”
