Brexit concerns drag down London property prices

The average rate of growth across the UK’s 20 biggest cities has slowed to 4.9 per cent

The Houses of Parliament in London. The most recent study of UK house price growth found that in 85 per cent of local authority areas in London prices are falling. File photograph:  Jonathan Brady/PA

The Houses of Parliament in London. The most recent study of UK house price growth found that in 85 per cent of local authority areas in London prices are falling. File photograph: Jonathan Brady/PA

 

While property prices continue to rise at an alarming rate here – latest estimates come in at around a 12 per cent increase year on year – the fortunes of our neighbours on the other side of the pond are quite different. In London, prices have actually fallen in real terms, below the level of inflation, to 2.3per cent for the year. This reflects an increase of just 0.5 per cent in the three months to September.

The most recent study of UK house price growth, conducted by Hometrack, found that in 85 per cent of local authority areas in London, prices are falling.

According to Richard Donnell, research director at Hometrack: “Stretched affordability, low yields for investors and concerns over Brexit and its impact on employment are weighing on market sentiment. As a result, further house price falls in real terms across London are inevitable as prices realign to what buyers are willing to spend.

“Consequently, nominal house price inflation in London looks set to remain between 1 per cent and 3 per cent over the next six to 12 months.”

The average rate of growth across the UK’s 20 biggest cities has slowed from 6 per cent a year ago to 4.9 per cent. Cambridge, Oxford and Cardiff all recorded flat growth running only slightly below the 3 per cent level of inflation.

The big winner was Scotland, where the housing market has picked up again after sluggish growth.

Edinburgh recorded the fastest house price growth of all UK cities, overtaking Manchester and Birmingham, with house prices growing 6.7 per cent in the year to September. Glasgow also recorded a significant increase in growth, up from 1.8 per cent a year ago to 5.6 per cent today.

Transactions are well ahead in Scotland too, with a 20 per cent increase in the number of property sales in the past three months compared with the same period last year. In England this figure was 14 per cent, and in fact transactions across the UK fell by 1.8 per cent between August and September.

It’s an interesting contrast with our own experience where latest Eurostat figures show that Irish house prices are increasing at the fourth highest rate in Europe – almost twice the average rate across the EU.

Dysfunctional market factors feed into this, including a critically low supply of housing stock here, but the UK experience also points to long term problems of their own, including early market fallout from the Brexit bombshell.