Doom mongers' Brexit property price crash forecasts appear unfounded
Fears that Brexit would lead to a UK house price crash are looking to have been overblown, property brokers claim.
UK exhibitors at the Cityscape property exhibition in Dubai last month say that they are seeing little evidence that dire predictions by former chancellor George Osborne that house prices in Britain could crash by as much as 18 per cent if the country voted to leave the EU are coming to pass.
Walking through the Cityscape Hall between huge cardboard displays of the Houses of Parliament and London’s black cabs it was hard not to notice that the amount of space taken by British companies this year is double the previous year as agents and developers hope that a fall in the value of the pound against the US dollar is enough to convince Middle Eastern buyers to keep investing in London.
“Brexit is a red herring,” says Jennet Siebrits, head of residential research at CBRE. “We did see a drop in confidence immediately after the vote because it was a huge shock. Overall the UK market, and London specifically, has been really resilient. A lot of people were very pessimistic and said the market would collapse because of Brexit and we are genuinely not seeing it in our own figures.”
“If you think about just the basic supply and demand dynamics. Over the last 10 years, a million people moved to London and only 200,000 new homes were built,” she adds. “That’s a huge imbalance. Even if some banking jobs do move to Dublin or Frankfurt or Brussels it would take a lot of people moving out to realign the supply demand imbalance.”
Last month, a survey from the Royal Institution of Chartered Surveyors showed that confidence among UK estate agents moved into positive territory for the first time since April.
UK estate agents currently expect house prices to rise 3.3 per cent a year on average for the next five years – the most confident prediction given in the survey since the referendum vote in June, it said.
Lender Nationwide reported that house prices defied expectations and rose 0.6 per cent in August, pushing overall average house prices 5.6 per cent higher than a year earlier.
At Cityscape, standing next to a scale model of thousands of new homes due to be built in London’s Greenwich Peninsular, Hugo Thistlethwayte, head of international residential sales for Savills is confident that the worst of the Brexit shock has already passed.
“It was a shock and what do people do in shocks? They pause and take stock,” he says. “And we are in an ongoing period of uncertainty and so investors are already saying, it’s not like a 9/11 shock, it’s not like going into recession. This is a one off thing that isn’t changing. It’s not going to get cancelled or called off. It’s part of the reality and if I want to do something I need to go and do it.”
But although the wider UK property market may well be weathering the storm, numbers for London’s prime central market are not so optimistic.
According to Knight Frank, average prices in the London district of Knightsbridge fell 7.3 per cent in the year to the end of July. Prices in Chelsea were down 7.2 per cent, South Kensington prices fell 5.7 per cent and Mayfair prices dropped 0.8 per cent.
Analysts are most concerned about the 20,000 units currently planned for or under construction in the Battersea and Nine Elms districts of the capital and aimed specifically at the sort of buyers you get at Cityscape.
Stockdale Securities analyst Alastair Stewart predicted that high rise development values will crash by at least 50 per cent as overseas investors from Asia and the Middle East, many of whom have paid only small off plan deposits, pull out en mass before buildings are completed.
Although it is hard to get much data yet for these specific areas, according to property portal Zoopla, the asking price for a two bedroom flat in the Battersea Power Station development was slashed to £1.299 million in August from £1.9 million earlier this year.
“There are pockets in the UK where there are potentials for over-supply,” says Savills’ Mr Thistlethwayte. “Funnily enough the enquiries for the sales of those schemes is still fairly consistent. It’s those that are requiring tenants to follow into it that we are looking more carefully at. And part of Nine Elms has sold with a view that it will be tenanted. Some of that will be taken up with the Chinese and the American Embassies opening. But I do think there will be an oversupply and it’s all coming on stream at a similar period.”
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