Will a vote to leave the European Union mean property values in London fall? Or could it help ease the capital’s housing crisis?
Can Britain survive outside of the European Union? What is now the world’s fifth largest economy did just that before Britain joined the European Economic Community in 1973, but any vote to leave the EU on 23 June could reduce the value of property, particularly in London.
North London-based rent guarantee specialist Assetgrove points out that it is argued that putting the brakes on immigration could ease the intense competition for housing in London, and as a result slow down both property prices and rental inflation.
Others believe a reduction in property values in the UK, and London in particular, might help first-time buyers get a foot on the property ladder.
This belief has been fuelled by comments from the International Monetary Fund, says estate agent Eden Harper, which operates out of offices in Battersea and Brixton in south London, where the value of homes has grown by more than 10% over the past 12 months.
The IMF said: “Brexit could cause a sharp drop in property prices”. That view was backed by Chancellor George Osborne, who claimed that by 2018 – the date Britain’s exit from the EU would be confirmed in the event of Britons voting to leave – houses could be worth up to 18% less than if the UK voted to remain.
Meanwhile, estate agents – including North London-based M&M Property – have voiced concerns that a vote to leave the EU would slice £2200 from the average price of residential property by 2018 – and more in London.
In fact, according to figures put out by the National Association of Estate Agents the average price of a home in London would be £599,200 by 2018 if we remain in the EU. But that figure would drop to £591,700 if we vote out.
And all the time the referendum campaign has seen politicians and business leaders exchange claim and counter claim about the effect of a vote to leave the EU, the number of people seeking to buy property has dropped, with potential purchasers thinking twice about putting their property on the market.
According to The Royal Institution of Chartered Surveyors, a drop in buyer enquiries will ensure property prices fall over the next three months.
As a result, the market in London has softened somewhat. It’s also been widely reported that estate agents in Grimsby, Exeter and Leicester have seen sales drop dramatically during the campaign.
In fact, the RICS has revealed that across the country 33% more property professionals have reported a drop in enquiries rather than a rise.
The truth is, of course, no-one can really be certain what will happen if UK voters opt to leave the European Union.
Though property values could decline and interest rates could rise in the event of a vote to leave the EU, the effect on demand for homes is already being felt.
Sales of homes have declined more quickly than at any time since 1999, according to RICS, and the demand for property over the past month or so has experienced its most rapid fall in eight years.
However, it should be noted that this statistic has been affected by the surge in the number of property sales before 1 April as buy-to-let investors rushed to complete purchases before the introduction of a 3% stamp duty surcharge on second homes.
London Bridge estate and letting agent Williams Lynch reports that March was an exceptionally busy month because of the buy-to-let market and it is no surprise the level of activity dipped in April and May.