Samir Salya on the Stagnation of London House Prices

As the effect of Brexit begins to be felt, the move could dramatically hurt the UK economy. This is having a monumental impact on the London property market, as the weakening pound and the unstable future of the UK are leaving buyers uncertain about purchases. In Bloomberg News’ recent survey of 14 economists, 10 cited economic and political uncertainty as some major reasons for prices stalling in the capital.

Uncertainty a key factor

Bloomberg News survey points towards an ongoing stagnation in the city’s real estate market. Due to the problems that Brexit could have on the UK and the shaky economy, prices are likely to stay decreasing yet steady in upcoming years. Despite a serious crash remaining unlikely, London is unlikely to match the recent years of booming growth in its property sector.

The survey pointed out several reasons for this decline. 10 out of the 14 surveyed economists cited economic uncertainty, 7 pointed to tax changes for landlords were at fault, while a further 6 noted the affordability issues as chief reasons.

Samuel Tombs, an Economist at Pantheon Macroeconomics involved in the survey, states that the turning point for London’s property market was the Brexit vote, leaving uncertainty over how many jobs will be available in the capital and how the economy will be affected.

Speaking to Bloomberg News, Tombs comments: “We see UK home values rising 1.5 per cent in 2017 but London will underperform, given what we have seen so far this year. The market will remain this way until we get clarity on what sort of Brexit the UK will have; that won’t be anytime soon. It’s clear that Brexit is adversely affecting the UK economy whereas Europe’s is steaming ahead. It will take until March 2019 to get that clarity and until then the housing market will continue to struggle, with the London market bearing the brunt of it.”

Sluggish but steady

Continuing the trend of decline, London is now the weakest performer nationwide, according to the latest figures from Land Registry and the Office for National Statistics (ONS). Homes in the capital sold for an average of £482,000, a slight increase of 2.4% on the previous year.

This upwards turn is showing some hopeful signs as Brexit negotiations get underway but still indicates the capital is vastly underperforming compared to the rest of the UK. In comparison, the national average house prices saw a 5.1% increase year-on-year. With the West Midlands showing an increase of 7.2%, London is trailing behind.

Despite this slow-moving increase in the capital, the market seems to be on a steady path. With major changes to the country unlikely to come into place anytime soon, the future of the London property market remains sluggish and uncertain.

About Samir Salya

Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.