London’s property market growth slumps over Brexit fears

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After Brexit referendum, the annual growth of the real estate prices in the UK has slowed down, especially in London where a negative annual growth was recorded this year.

A new apartment development under progress beside the River Thames in London, Thursday, January 29, 2009.
A new apartment development under progress beside the River Thames in London, Thursday, January 29, 2009. (AP)

Growth rates of real estate prices in Britain, and especially in London, have increasingly fallen since the Brexit referendum in June 2016.

The property market stagnation is mostly due to the Brexit process and stamp duties.

According to data published by the Office for National Statistics of the United Kingdom in July 2018, the lowest growth rate of housing prices was recorded in London at a negative annual growth rate of 0.7 percent.

The annual growth is at its lowest point since 2009, that was an outcome of the 2008 global financial crisis.

London, which accounts for 25 percent of Britain’s flats and small houses market, is still the most expensive city of the UK with the average house price at $633,703.72 (£484,926) as compared to the UK average of $403,973.50 (£309,191).

Britain is due to leave the EU in March and the pound recently lost value against the euro last month amid no-deal angst.

A weaker currency should make UK houses more attractive to foreign buyers, but Brexit uncertainty is keeping them away.

As a result an exceptional slow down was seen in London’s Chelsea and Kensington areas, where the average house price is $1,567,960.80 (£1.2 million) and that in turn causes the disparity between the housing prices in London and the rest of Britain.

The annual growth rate of London house prices was 12 percent at the time of the Brexit vote. However, today, the decreasing growth rate in London drags down the country average.

The prospect of higher interest rates was a further concern, the Royal Institution of Chartered Surveyors (RICS) said, after the Bank of England raised rates in August for only the second time in a decade and said it was on course to raise rates gradually.

“It is clearly very difficult to talk about the housing market … without being acutely aware of the marked differences in trends across the UK. In many parts of the country the housing market actually remains quite firm,” RICS economist Simon Rubinsohn said.

UK’s property market will also be at risk if trade barriers are introduced after Brexit negotiations.

A Reuters poll of analysts and experts had predicted that house prices in London’s overvalued market will fall this year and next, and will tumble if Britain fails to reach a deal ahead of its departure from the European Union.

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