We were warned time and time again by the UK Treasury that house prices would be hit by a Brexit.
Now, after Britons voted to leave the European Union on June 23, we have evidence that this prediction is coming true, especially in London.
Asking prices for UK properties on the market have fallen on average by 0.9% (-£2,647) so far this month to £307,824, according to Rightmove. Inner, or central, London was particularly badly hit, with asking prices there falling by 2.3% (-£19,051).
This is a bad sign. House prices rise and fall during certain periods of the year but late spring/summer is usually peak season. Most people go to buy and sell homes at this time of year in the hope of moving in plenty of time before Christmas. We should be seeing healthy price growth right now.
Not only are house prices suffering compared to the prior month, we are also seeing prices fall when you compare it to this time last year.
Take a look at the below chart that clearly shows a year-on-year fall in inner London property prices:
This is significant because UK property prices, especially those in London, have been rocketing for years as the economy has been healthy, interest rates are low, employment is high, and the nation has a significant supply and demand imbalance.
Interest rates are still low, employment still high, and there still aren’t enough houses to meet demand in London. But the outlook for the economy has nosedived in the wake of the Brexit vote, with most banks and economists predicting a recession.
This is only the start. House prices are likely to fall a lot further from here. Last week, the Royal Institute of Chartered Surveyors outlined exactly how Brexit is going to kill house prices.
RICS said on Thursday that new buyer enquiries “declined significantly” in June, with 36% more chartered surveyors reporting a fall in interest as part of the June housing survey. This is the lowest reading since mid-2008 when the financial crisis was in full swing.
Research firm LonRes says that the “number of cuts to asking prices surged by 163% in the 12 days following the referendum compared with the 12 days beforehand,” according to the Financial Times.The report says that this failed to materialise in sales.
But we were all warned.
Prior to Britons voting in the referendum, the UK Treasury said that house prices could crash by between 10% to 18%. Meanwhile, Mark Burrows and his team at Bernstein said it would be much worse. They think property prices could crash by as much as 30% — nearly double the upper estimate from the former Chancellor George Osborne.
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