LONDON — A mass relocation of financial services staff due to Brexit could free up swathes of houses in central London and potentially bring down prices, according to a UBS research note shared with clients.
Around 700,000 people work in financial services in London, and consultants at PwC estimate up to 100,000 people may need to relocate to continental Europe by 2020 if the UK does not secure financial services passporting rights as part of Brexit negotiations. This currently seems unlikely as Prime Minister Theresa May has made clear her preference for leaving the EU Singler Market as part of Brexit.
The loss of 100,000 financial services staff could free up the same number of houses in London, UBS says, if you assume one financial service worker per household.
The total number of dwellings in the capital is about 3.5 million, meaning that a relocation of 100,000 people could free up 1.1% to 2.9% of London housing stock, depending on the occupancy per dwelling assumptions.
UBS strategist Caroline Simmons, the report’s author, said any financial services exodus could have a negative impact on house prices in the capital.
But Simmons adds: “While we assume it could be negative for house prices overall, it is difficult to know how this translates to a price impact as new supply would presumably be curbed under such conditions, and location-specific dynamics would also come in to play.”
The total number of new house completions in London was 21,000 last year. If 100,000 people relocated, that could, therefore, free up to 5 times the current annual new supply if completions remain constant. Supply would likely be highly concentrated in certain types of properties and areas.
A short supply of houses on the London market has fuelled rapid house price growth in recent years.Foxtons, an estate agent chain that focuses only on London, has repeatedly cited a shortage of homes as a factor supporting its business.
Prices in the capital are around 55% above 2007 levels, Nationwide says, while those in the north of England and elsewhere are still below their 2007 peaks. The average house price in London was £478,142 compared to the UK average of £209,971, according to Nationwide’s June house price index.