Warning of ‘see-saw’ effect on London housing market if Britain’s swings to Brexit


Property experts warn of a see-saw effect on housing in London if the UK votes for a Brexit.

While an exit could spell good news for central London’s heated housing market, many property experts predict it could potentially exacerbate the pressure on affordable housing.

Housing associations play a crucial in securing long-term debt, and the credit ratings for each are dependent on the state of the UK’s credit strength.

As the credit strength of housing associations is so closely linked to the strength of the UK government, then, many property analysts have warned that they could suffer if a Brexit has a negative impact on this.

Mayoral candidates such as Zac Goldsmith believe that the affordable housing sector would be better served in a reformed EU, suggesting that a full audit of public housing stock take place in order to determine if the buildings could withstand further upward development to create new housing.

Latest figures from opinion polls have shown that an increasing number of people – perhaps buoyed by mayor Boris Johnson’s recent move to oppose David Cameron and back a Brexit – are supportive of a parting of ways.

Great Britain has been a member of the EU since 1970, and so naturally, trepidation is rife about what an exit could mean for a number of things – especially the property market. With London home to one of the most expensive housing markets in the world and high rates of foreign investor activity, changes to the state of the UK could have serious implications – but just what would those be?

When the threat of Labour’s proposed Mansion Tax lingered over central London’s prime real estate market ahead of the general election, activity stalled, as did prices.

The same has been seen in PCL in the first quarter of 2015, with prices falling by 0.1% between February and March. The number of transactions in this market has lessened gradually over the past year, according to a report from Pastor Real Estate. Transactional volume dropped by 18.5% from Q4 2014 to Q4 2015, with the average price per square footage in local houses falling by 10.2% in the same period to £1,803.

Any time there are drastic impending changes that could potentially affect higher rates of taxation or fluctuation in currency value for example, a certain degree of market volatility can be expected. While investors may seek out and express interest in a property, they are often keen to wait until a sure outcome is announced before parting with any cash.

For example, in the early hours of May 8th following the results of the General Election, hundreds of millions of pounds exchanged hands as buyers moved off the fence and took action. The same can be expected for the market in PCL, especially when looking at areas such as Mayfair, Kensington, and Knightsbridge, given the high property prices here.

Should prices fall in the event of a Brexit, buying and selling should in theory be easier.

Prices are projected to fall in the event of an independent UK, which would make property in these notoriously pricey parts of town more accessible.

As market confidence is also expected to slump (a recent poll revealed that 65.3% of respondents believed a Brexit would negatively impact the UK’s property market), acquiring a property quickly is also increasingly likely.

For buyers who know they want to enter this market and retain a property in central London, weakening prices in the wake of a Brexit is not necessarily a bad thing. However, one demographic that may be hesitant to buy or hold on to property investments in this part of the capital is foreign buyers.

As a Brexit could potentially impact foreigners planning to live in the UK, along with freedom of movement, many overseas buyers are likely to refrain from property purchases until the vote has been passed.

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