In the wake of Britain voting to leave the EU, most aspects of British families' lives are overshadowed by a great deal of uncertainty. One of the many concerns raised is whether Brexit will have an impact on house prices in London and indeed across the country.
Nationwide House Price Survey
Prior to the referendum, many economists warned that a vote to leave the EU could result in house prices falling sharply. The latest Nationwide national house price survey (July 2016), the first taken after the Brexit vote, showed an increase of 0.5 perc cent in house prices in July, which represents an annual growth in house prices of 5.2 per cent, which is similar to that of June.
Will Brexit Affect House Prices in London?
However, while these figures look promising, Chief Economist (Nationwide) Robert Gardner warns that it is not possible yet to predict how house prices in London will be affected by Brexit because any fallout from this vote may not have been felt yet. This is partly due to the fact that the index utilises data generated by mortgage offers and there is a definite lag between buyers making purchase decisions and mortgages being offered.
What's more, it is also not quite possible yet to separate any effects Brexit may be having on London house prices from the effects of April's implementation of the tax on buy-to-let investments increase.
Outlook for Housing Market 'Unusually Uncertain'
Stating that the outlook for the housing market is currently 'unusually uncertain', Mr Gardner added the overall economic uncertainty may, in the short term, lead to demand for homes becoming weaker.
He continued to say that in the wake of the Brexit vote, household confidence has fallen sharply, in particular in terms of major purchase making. In the past, this had a direct correlation to mortgage activity.
How all this will ultimately be felt in terms of house prices in London is, according to the Nationwide's report, uncertain. The report also pointed out that estate agents' books show the lowest level of stocked homes in thirty years and that home building continues to fail in keeping up with the demand for homes. The National Statistics Office did, in fact, report that after two successive quarters of declining output, the construction industry entered a recession this June.
Chief economist Gardner believes that in the long term, the job market across the UK will be crucial to the outlook on house prices and that the fact that unemployment is currently at a 10-year low is somewhat encouraging.
Decreased Value of Income
Unfortunately, while there are indeed more people in work, average workers have since 2007 seen the actual value of their income decrease by 10.4 per cent - this is compatible to that experienced in Greece. No comment on how this might affect house prices was made by Robert Gardner.
It is impossible to say what effect leaving the European Union will have on house prices in the UK at this precise moment. As time goes by, the situation will undoubtedly become much clearer. We here at Knight Bishop will, of course, do our best to keep you updated on the latest developments, facts and figures.
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